On April 30, the Federal Reserve announced revisions to its Main Street Lending Program. This program, which is part of Title IV of the CARES Act, makes loans available to small and medium sized businesses affected by COVID-19. Eligible businesses must meet the following criteria:
- Established prior to March 13, 2020
- Not be considered ineligible per 13 CFR 120.110(b)-(j) and (m)-(s)
- Have not more than 15,000 employees or have not more than $5 billion 2019 annual revenue
- 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
- May only participate in one Main Street Loan Facility
- May not participate in the Primary Market Corporate Credit Facility
- May not receive support from another Title IV CARES Act program; note that participants of the Paycheck Protection Program may also apply for or borrow under the Main Street Lending Program
Like the Paycheck Protection Program, private lending institutions will facilitate the Main Street Lending Program. There are three facilities: the Main Street New Loan Facility (MSNLF), the Main Street Priority Loan Facility (MSPLF), and the Main Street Expanded Loan Facility (MSELF). Each facility offers:
- 4-year term
- Interest rate equal to one- or three-month LIBOR plus 300 basis points (3%)
- Principal and interest payments are deferred for one year
- No prepayment penalty
Additional information regarding each loan facility are detailed as follows:
|Main Street Lending Program Loan Options||New Loans||Priority Loans||Expanded Loans|
|Minimum Loan Size||$500,000||$500,000||$10,000,000|
|Maximum Loan Size||The lesser of $25M or an amount that, when added to outstanding and undrawn available debt, does not exceed 4.0x adjusted 2019 EBITDA (earnings before interest, taxes, depreciation & amortization)||The lesser of $25M or an amount that, when added to outstanding and undrawn available debt, does not exceed 6.0x adjusted 2019 EBITDA (earnings before interest, taxes, depreciation & amortization)||The lesser of $200M, 35% of existing outstanding and undrawn available debt, or an amount that, when added to outstanding and undrawn available debt, does not exceed 6.0x adjusted 2019 EBITDA (earnings before interest, taxes, depreciation & amortization)|
|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%|
Eligible borrowers must follow specific guidelines, including making commercially reasonable efforts to maintain payroll and retain employees during the time the loan is outstanding. In addition, the business must make certifications to confirm the business’s eligibility for the program and that it will follow specific guidelines of the program including those affecting other debt, compensation, stock repurchase, and capital distribution restrictions.
Other terms and conditions may apply. As with all loans or loan programs, borrowers are encouraged to read all loan documentation carefully.
The Federal Reserve has not yet announced when the Main Street Loan Program will be made available or which lenders may participate. For more information, including term sheets and FAQs, visit https://www.federalreserve.gov/monetarypolicy/mainstreetlending.htm. HBK is committed to providing more information as it becomes available. If you have questions about this information, please contact your HBK Advisor.