Article written by:
Jennifer Zimmerman, CPA
Senior Manager, Tax & Business Advisory Services
Article originally published June 11, 2020
Last updated June 16, 2020
On June 15th, the Federal Reserve Bank of Boston, which administers the Main Street Lending Program (MSLP), announced that it had opened registration for interested lenders, saying that banks are “encouraged to begin making Main Street program loans immediately.” Interested borrowers are encouraged to reach out to their lender, as banks will be administering the program. The news comes after many revisions to the terms of the program, as recently as a week before the program went live. At that time, the Federal Reserve Board announced additional changes to the MSLP terms and provided more answers to frequently asked questions. The changes were made in order to allow more small and medium-sized businesses to receive support under the program based on feedback provided after the program was announced.
The changes include:
- Lowering the minimum loan size for certain loans to $250,000 from $500,000;
- Increasing the maximum loan size for all facilities;
- Increasing the term of each loan option to five years, from four years;
- Extending the repayment period for all loans by delaying principal payments for two years, rather than one, with interest-only payments commencing in year two; and
- Raising the Reserve Bank’s participation to 95% for all loans.
An updated version of the three different facilities available is as follows:
New Loans |
Priority Loans |
Expanded Loans |
|
|---|---|---|---|
|
Term |
5 Years |
5 Years |
5 Years |
|
Rate |
LIBOR +3% |
LIBOR +3% |
LIBOR +3% |
|
Minimum Loan Size |
$250K |
$250K |
$10MM |
|
Maximum Loan Size |
Lesser of (a) $35MM or (b) an amount that doesn’t exceed 4x the borrower’s 2019 EBITDA (including existing outstanding and undrawn committed debt) |
Lesser of (a) $50MM or (b) an amount that doesn’t exceed 6x the borrower’s 2019 EBITDA (including existing outstanding and undrawn committed debt) |
Lesser of (a) $300MM or (b) an amount that doesn’t exceed 6x the borrower’s 2019 EBITDA (including existing outstanding and undrawn committed debt) |
|
Payments (first two years principal deferred) |
Year 3: 15% |
Year 3: 15% |
Year 3: 15% |
|
Risk Retention by Lender |
5% |
5% |
5% |
Per the Federal Reserve’s release of form documentation, borrowers will be subject to extensive financial reporting during the life of any Main Street Program loan (details found in Appendix C of the FAQs PDF document). This will require the calculation and certification of numerous financial data on both a quarterly and annual basis.
If you have questions regarding the Main Street Lending Program, please contact us.
