April 10, 2020
The Federal Reserve announced on April 9th that it will activate its Main Street Lending Program. The program was borne out of the $2.3 trillion economic relief package Congress approved last month.
The Program enhances support for small- and mid-sized businesses that were in good financial standing before the crisis by offering 4-year loans to companies employing up to 10,000 workers or with revenues of less than $2.5 billion.
Many ACMA members should find this relief package attractive because they can participate in the Paycheck Protection Program (PPP) forgivable grant as well as the Main Street Lending Program. There is no mutual exclusivity between the programs.
Key Components of the Program
- principal and interest payments to be deferred for one year;
- eligible banks may originate new Main Street loans or use Main Street loans to increase the size of existing loans to businesses;
- banks will retain a 5% share, selling the remaining 95% to the Main Street facility, which will purchase up to $600 billion of loans;
- maximum loan size that is the lesser of (i) $150 million, (ii) 30% of the Eligible Borrower’s existing outstanding and committed but undrawn bank debt, or (iii) an amount that, when added to the Eligible Borrower’s existing outstanding and committed but undrawn debt, does not exceed six times the Eligible Borrower’s 2019 earnings before interest, taxes, depreciation, and amortization (EBITDA);
- firms 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.
This member exclusive update has been provided in consultation with our Washington, DC-based government affairs and global business advisory firm, The Vogel Group – www.vogelgroupdc.com