The Federal Reserve has established the Main Street Lending Program (MSLP) to help facilitate loans to small and mid-size businesses that were in good standing prior to the COVID-19 crisis.
The MSLP has two components: one for new loans (Main Street New Loan Facility, or MSNLF) and another to increase the size of existing loans (Main Street Expanded Loan Facility, or MSELF). The combined size of these programs is up to $600 billion.
Eligible businesses are those with up to 10,000 employees or up to $2.5 billion in 2019 annual revenues. They must be created or organized in the United States or under the laws of the United States. Additionally, the business must have significant operations in, and a majority of their employees based in, the United States.
Businesses that participate in the MSNLF may not also participate in the MSELF or the Primary Market Corporate Credit Facility.
A loan under the MSNLF will have the following features:
- Maximum maturity of four years;
- The interest rate is the adjustable Secured Overnight Financing Rate plus 250-400 basis points;
- Principal and interest payments deferred for one year;
- Minimum loan size of $1 million ($500k);
- Maximum loan size of the lesser of:
- (1) $25 million, or
- (2) an amount that, when added to the borrower’s existing outstanding and committed but undrawn debt, doesn’t exceed four times the borrower’s 2019 earnings before interest, taxes, depreciation, and amortization (EBITDA);
- Early payment is permitted without penalty.
A loan under the MSELF will have many of the same features, except the maximum loan amount is $150Million.
APPLYING FOR A LOAN:
Businesses may apply for the MSNLF loans through eligible lenders. Borrowers will be required to attest that they:
- Need financing due to circumstances presented by COVID-19, and that by using the proceeds of the loan they will make reasonable efforts to maintain payroll and retain their employees during the term of the loan.
- Meet the EBITDA leverage condition stated in the loan terms above.
- Won’t seek to cancel or reduce any of its outstanding lines of credit with the lender or any other lender.
- Commit to refrain from using the proceeds of the loan to repay other loan balances and refrain from repaying other debt of equal or lower priority, with the exception of mandatory principal payments, unless the borrower has first repaid the loan in full.
- Will follow compensation, stock repurchase, and capital distribution restrictions that apply to direct loan programs under the CARES Act.
- Are eligible to participate.
A MSELF loan will also require certain attestations.
INTERPLAY WITH PPP:
Businesses that have a PPP loan may also take out a MSLP loan.
Small businesses should work with an experienced financial advisor to carefully assess all of the available assistance programs to determine the interplay and best option for their specific circumstances.
For more information please feel free to contact us at firstname.lastname@example.org or call us at 703-437-8877.
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