The Federal Reserve Bank of Boston on Monday, announced on July 6, 2020 that the Main Street Lending Program (MSLP) is now fully operational and ready to purchase participations in eligible loans that are submitted to the program by registered lenders. Institutions participating in the MSLP may now submit qualifying loans for the Fed to purchase. The Fed will buy up to 95% of each loan submitted. The Federal Reserve encourages lenders to begin submitting qualifying loans.
“This is an important milestone for the Main Street program,” said Eric Rosengren, president of the Boston Federal Reserve Bank, which is administering the program for the Federal Reserve System. “Given the pandemic’s shock to the economy, and its uncertain duration, support for businesses and their employees through bank lending is critical.”
The Federal Reserve Bank of Boston also announced its intention to publish in the coming days a state-by-state listing of lenders accepting new business customers under the MSLP and electing to be listed. Anecdotally, this is a welcome development for many potential borrowers, as unlike the case with the Paycheck Protection Program under the CARES Act where there have been many participating bank, we have not seen very many banks announcing their participation in the MSLP as eligible lenders thus far. In any event, meeting the MSLP criteria, having sufficient EBITDA and being introduced to an eligible lender who may accept applications from new business customers, does not guarantee a borrower a MSLP loan. Indeed, as permitted by the MSLP, lenders can assess a borrower based on the lenders’ own underwriting standards, in addition to the terms of the MSLP, as part of evaluating financial condition and creditworthiness. Lenders’ assessment of their own underwriting standards may mean many applicants are not approved for their MSLP loans, and borrowers are advised to seek professional help in preparing and submitting their applications to eligible lenders to make sure their applications highlight their creditworthiness and financial performance.
In other updates on MSLP, back in June 15, 2020, the Federal Reserve also announced it will be seeking public feedback on a proposal to expand MSLP to provide access to credit for nonprofit organizations. As with the existing MSLP, which targets small and medium-sized businesses, the proposed expansion would offer loans to small and medium-sized nonprofits that were in sound financial condition before the coronavirus pandemic and could benefit from additional liquidity to manage through this challenging period. The Federal Reserve’s press release on the nonprofit organization expansion, including links to the draft term sheets for MSLP loans for non profit organizations can be found here.
You can see our Comparison Chart for Main Street New Loan Facility, the Main Street Expanded Loan Facility and the Main Street Priority Loan Facility here.
Do not hesitate to contact us for more information on the Main Street Lending Program.