New Guidance from the Federal Reserve Expands Eligibility for the Main Street Lending Program

The Federal Reserve announced new guidance on Thursday, April 30, 2020, that expanded the reach of the Main Street Lending Program, one of the many new programs established to help American businesses survive the pandemic. In the news release, the Federal Reserve expanded eligibility requirements and lowered minimum loan sizes in an effort to extend support to even more small- and medium-sized businesses.

Now, businesses with up to 15,000 employees, or up to $5 billion in annual revenue, are eligible for the program. The initial program terms restricted eligibility to companies with up to 10,000 employees and $2.5 billion in revenue. Additionally, the new terms lower the minimum loan size from $1 million to $500,000.

More about the Main Street Lending Program

The Federal Reserve established the Main Street Lending Program to provide crucial financial assistance to small- and medium-sized companies affected by the coronavirus pandemic, especially targeting companies that were too small to access the capital markets necessary to receive help through the Paycheck Protection Program. The Main Street Lending Program establishes three different loan types for eligible companies, including new loans, priority loans, and expanded loans. Each type boasts a different maximum loan size, but all three provide a four-year, low-cost lifeline with deferred principal and interest payments for the first year.

Below is a summary of the lending program, updated to reflect the new loan terms.

Main Street Lending Program Loan Options New Loans Priority Loans Expanded Loans
Term 4 years 4 years 4 years
Minimum Loan Size $500,000 $500,000 $10,000,000
Maximum Loan Size Lesser of $25M or 4x 2019 Adjusted EBITDA Lesser of $25M or 6x 2019 Adjusted EBITDA Lesser of $200M, 35% of outstanding and undrawn available debt, or 6x 2019 Adjusted EBITDA
Risk Retention 5% 15% 5%
Payment
(year one deferred for all)
Years 2-4: 33.33% each year Years 2-4: 15%, 15%, 70% Years 2-4: 15%, 15%, 70%
Rate LIBOR + 3% LIBOR + 3% LIBOR + 3%

The bottom line

Aprio’s advisors are monitoring all new information from the Federal Reserve and are providing up-to-date guidance to clients related to additional provisions and considerations related to the Main Street Lending Program. If you think your business may be eligible for the Main Street Loan Program or may be impacted by the recent changes, join Aprio’s upcoming webinar where Aprio advisors will present new information and answer questions from lenders as well as borrowers and investors.

If you need assistance or have questions about the Main Street Lending Program, contact Michael Levy or Bill Dupee

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