Jun 12, 2020

Main Street Lending Program Update. June 8, 2020 Amendments: Requirements Relaxed for Borrower Eligibility and Greater Flexibility for Repayment. Program to be Open “Soon.”

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Federal Reserve Chairman Jerome Powell said on May 29, 2020 that the Federal Reserve’s Main Street Lending Program was “days away” from providing loans through its Main Street program for small-and medium-sized businesses.

As it turns out, on June 8, 2020, the Federal Reserve adopted further changes to the three Main Street Loan Programs, with amendments to the terms sheets for the Main Street New Loan Facility, the Main Street Expanded Loan Facility and the Main Street Priority Loan Facility (which were last updated on April 30, 2020), as well as an amendment to their FAQ (which had been last updated on May 27, 2020).   Despite the delays in the launch of this program, the good news for borrowers is that the June 8, 2020 amendments relaxed some of the requirements to allow more small and medium-sized businesses to be able to receive support.

In particular, the Federal Reserve lowered the minimum loan amount, raised the maximum loan limit, adjusted the principal repayment schedule to begin after two years, and extended the term to five years, providing borrowers with greater flexibility in repaying the loans. The Federal Reserve expects the Main Street Lending program “to be open for lender registration soon and to be actively buying loans shortly afterwards”.

The specific changes to the terms of all three programs include:

  • Lowering the minimum loan size for certain loans to $250,000 from $500,000;
  • Increasing the maximum loan size for all facilities;
  • Increasing the term of each loan option to five years, from four years;
  • Extending the repayment period for all loans by delaying principal payments for two years, rather than one; and
  • Raising the Federal Reserve’s SPV participation to 95% for all loans (whereas it had been 85% participation for the Main Street Priority Loan Facility previously).

As soon as the Federal Reserve launches the program, eligible lenders may register for the program by completing the Lender Registration Certifications and Covenants and making the certifications set forth therein to the Federal Reserve Bank of Boston and the special purpose vehicle (SPV) formed by the Federal Reserve Bank of Boston which will purchase 95% participations in loans.

The Federal Reserve has said that once eligible lenders have successfully registered for the program, lenders are encouraged to begin making Main Street loans immediately.  Upon making Main Street loans, loan participations will be purchased by the SPV upon the eligible lender’s submission of additional documents to the SPV (which are currently found here).

Anecdotally, we had heard that many banks will not immediately be registering to become eligible lenders under the Main Street lending program, which is in contrast to the case of PPP loans where we saw far greater participation by banks.  Perhaps the recent amendments would encourage more eligible lender participation.

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, or see all of our CARES Act and COVID-19 resource center content here.

Do not hesitate to contact us for more information on the Main Street Lending Program.

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