Effective April 9, 2020, the Federal Reserve authorized a series of programs to provide up to $2.3 trillion in loans to households, businesses, and state and local governments struggling to deal with the COVID-19 pandemic.
Below is an overview based on available information of the Main Street Lending Program, including the Main Street New Loan Facility (MSNLF) and Main Street Expanded Loan Facility (MSELF).
The Federal Reserve’s announcement and terms outlined below do not include the detailed procedures that will be required for full implementation of the Main Street Lending Program, and numerous details of the program are not yet resolved. We expect additional details regarding both a borrower’s application for credit under the program and the mechanics of a lender’s sale of loans to the MSNLF or the MSELF will be forthcoming after April 16, 2020, the close of the comment period stated in the Federal Reserve’s announcement.
What is clear is that clients seeking Main Street funding will need to apply through banks and other lenders authorized to process the loans. We advise clients to reach out to their bank and other lenders now to determine whether you will be able to apply for Main Street funding through these institutions. If your bank is not participating in the program, clients are advised to reach out to other lenders.
As with the PPP loans, we expect a similar rush of applications for the Main Street funds. We advise clients to assess their needs for the funding now, as we expect funds will be distributed on a first-come, first-served basis. We urge clients to gather information now for the application so once it is released you are ready to submit.
Main Street Lending Program
The Federal Reserve established the Main Street Lending Program to enhance support for small and mid-sized businesses that were in good financial standing before the crisis. Eligible banks may originate new Main Street loans or use Main Street loans to increase the size of existing loans to businesses.
Organizations seeking Main Street loans must commit to make reasonable efforts to maintain payroll and retain workers. Borrowers must also follow compensation, stock repurchase, and dividend restrictions that apply to direct loan programs under the CARES Act. Firms that have taken advantage of the PPP may also take out Main Street loans.
- Main Street New Loan Facility (MSNLF): Term Sheet (April 9, 2020) (PDF)
- Main Street Expanded Loan Facility (MSELF): Term Sheet (April 9, 2020) (PDF)
Disclaimer: The information contained in this communication, including attachments and enclosures, is not intended to be a complete analysis of all related issues. Nor is it sufficient to avoid tax-related penalties. It has been prepared for informational purposes and general guidance only and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is made as to the accuracy or completeness of the information contained in this publication, and Perkins & Company, its members, employees and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.