Main Street Lending Program (MSLP) – Federal Reserve Provides Updates Including Changes to Certain Terms Allowing for Greater Participation

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Main Street Lending Program (MSLP) – Federal Reserve Provides Updates Including Changes to Certain Terms Allowing for Greater Participation

What’s New: June 8, 2020 MSLP Updates

On June 8, 2020, the Federal Reserve announced the expansion of the Main Street Lending Program by lowering the minimum loan size of the New Loan Facility and the Priority Loan Facility to $250,000 from $500,000.  Additional significant changes include:

  • Loan terms are extended on all programs from 4 years to 5 years with principal payments deferred for 2 years (rather than 1 year). Years 3-5 are 15%, 15%, 70% respectively. Interest payments are still deferred for the first year.
  • The maximum loan amount will now vary by facility but could be $300 million, up from the previous $200 million.
  • Lenders will now assume just 5% of the loan amounts, with the Federal Reserve participation amounting to 95% of the loan amounts.

Federal Reserve Chairman Jerome Powell indicated that “supporting small and mid-sized businesses so they are ready to reopen and rehire workers will help foster a broad-based economic recovery.”  He further stated that he is “confident the changes [the Federal Reserve is] making will improve the ability of the Main Street Lending Program to support employment during this difficult period.”

Though the program commencement date has not been announced, yesterday’s updates included updated Frequently Asked Questions and updated and revised term sheets for the three programs:

A summary of loan terms (with indications of changes from the April 30, 2020 term sheets) are included in the table below:

Main Street Lending Program Loan Options New loans Priority Loans Expanded Loans
Term 5 years
(previously 4 years)
Minimum Loan Size $250,000
(previously $500,000)
$10M
Maximum Loan Size The lesser of $35M, or an amount that, when added to outstanding and undrawn available debt, does not exceed 4.0x adjusted EBITDA
(previously $25M)
The lesser of $50M, or an amount that, when added to outstanding or undrawn available debt, does not exceed 6.0x adjusted EBITDA
(previously $25M)
The lesser of $300M, or an amount that, when added to outstanding or undrawn available debt, does not exceed 6.0x adjusted EBITDA
(previously $200M)
Risk Retention 5% 5%
(previously 15%)
5%
Principal Repayment Principal deferred for two years, years 3-5:
15%, 15%, 70%(previously principal deferred for one year and 33.33% repayment due in years 2-4)
Principal deferred for two years, years 3-5:
15%, 15%, 70%(previously principal deferred for one year and 15%, 15%, 70% repayment due in years 2, 3, and 4, respectively)
Interest Payments Deferred for one year
Rate LIBOR + 3%

About the Main Street Lending Program

The Federal Reserve’s $600 billion Main Street Lending Program is designed to provide support to small- and medium-sized businesses with fewer than 15,000 employees or 2019 annual revenues of $5 billion or less during the current period of financial strain by supporting the provision of credit to such businesses.

Recognizing that small- and medium-sized businesses are integral to the U.S. economy and create jobs for a large share of the U.S. workforce, the availability of additional credit is intended to help companies that were in sound financial condition prior to the onset of the COVID-19 pandemic maintain operations and payroll until conditions normalize.

What’s Next?

Aprio will continue to provide updates on the Main Street Lending Program as additional information is provided by the Federal Reserve and once the lending program commences.

Visit the Aprio website at https://www.aprio.com/service/main-street-lending-program for a comparison of certain terms of the Main Street New Loan Facility, the Main Street Expanded Loan Facility and the Main Street Priority Loan Facility.

How Aprio Can Help

To request a consultation on MSLP assistance with an  Aprio advisor, visit our MSLP page and complete the form on the right hand side. An advisor will be in touch within 24 hours.

Aprio’s Main Street Lending team can assist eligible borrowers and eligible lenders with:

  • Eligibility criteria
  • Calculation of 2019 Adjusted EBITDA (and Adjusted EBITDA through the current interim period in 2020)
  • Financial modeling and projections for 2020, 2021, 2022, 2023 & 2024
  • Assessment of alternative capital options versus MSLP
  • Evaluation of MSLP loan covenants
  • Evaluation of the impact of MSLP borrowings on existing loan covenants
  • Tax analysis and consulting
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