By Stephanie Mercado

As mandated by Congress and the CARES Act, the Federal Reserve announced $2.3 trillion in new programs, including a new Main Street Lending Program as summarized below:

Main Street Lending Program

The Federal Reserve will provide $600B to purchase loans made by eligible lenders as part of the Main Street Lending Program (MSLP). The MSLP includes funding for both new and expanded loans. The New Loan Facility permits banks to make new unsecured loans to qualifying borrowers. The Expanded Loan Facility permits banks to increase existing loans made to qualifying borrowers prior to April 8, 2020. Security for the Expanded Loan Facility will be provided on a pro rata basis with the existing loan, but only if the original loan was secured.

Who Is Eligible to Apply?

Businesses with up to 10,000 employees or $2.5B in 2019 revenues are eligible to apply, including those who were also eligible to participate in the Paycheck Protection Program. Borrowers must also be created or organized in the United States or under the laws of the United States with significant operations in and a majority of its employees based in the United States. Some smaller businesses may opt out of participating in the MSLP as the loan has a $1M minimum threshold amount.

What Are the General Loan Terms and Amounts?

  • New Loans: Banks can make new loans to the lesser of: (a) $25M or (b) an amount that when added to the borrower’s existing outstanding and committed undrawn loans, does not exceed four times the borrower’s 2019 EBITA
  • Expanded Loans: Banks can issues expanded loans to the lesser  of: (a) $150M, (b) 30% of the borrower’s existing outstanding and committed but undrawn bank debt or (c) an amount that does not exceed six times the borrower’s EBITA when added to the borrower’s existing outstanding and committed undrawn loans
  • Principal and interest payments on both new and expanded loans can be deferred for a year
  • Loans pricing will be 2.5 to 4% above the Security Overnight Financing Rate, and loan terms will be up to four years
  • Only existing loans with a maturity of four or less years are eligible to participate in the Expanded Loan Facility program

How Do Businesses Apply?

Businesses can apply through U.S. insured depository institutions such as banks and credit unions. The Federal Reserve has requested comments on the released term sheets for each program by April 16, 2020 from lenders, borrowers and other stakeholders. Shortly thereafter, banks are expected to commence processing applications upon the final release of program term sheets.

Are There Any Restrictions on Business Activities Related to the Loans?

In addition to providing a hardship attestation, the following restrictions apply to the MSLP:

  • Borrowers must abide by the dividend issuance and stock purchase restrictions in addition to restrictions on employee compensation as originally set forth in the CARES Act
  • Borrowers may not cancel or reduce any outstanding lines of credit with the MSLP lender or any other lender
  • Borrowers must make reasonable efforts to use loan proceeds to maintain payroll and retain its employees during the term of the loan
  • Lenders also have to acknowledge that MSLP loan proceeds will not be used to repay or refinance other pre-existing loans or lines of credit owed by the borrower to the lender
  • Borrowers can only participate in the New Loan Facility or the Expanded Loan Facility, but not both
  • Borrowers that participate in the Primary Corporate Credit Facility cannot participate in the MSLP

KJK will continue to monitor the pending release of the final program term sheets from the Federal Reserve for the New and Expanded Loan Programs as part of the Main Street Lending Programs. If you have questions or would like to discuss further, contact Stephanie Mercado at or 216.736.7272 or Kevin O’Connor at or 216.736.7213.