Small Businesses Set to Receive Funding from the Main Street Loan Program!

Coronavirus has caused companies of all sizes to take a hit. To help your businesses that need extra funds, the federal government came out with a few funding options. The Main Street Loan Program was intended to serve larger businesses like the SBA PPP served smaller businesses. But, as of Monday, June 8, 2020, the Federal Reserve Board expanded the program to give both small and medium-sized businesses the ability to receive funding. TGG, a San Diego-based outsourced accounting firm, explains the newly released details regarding the Main Street Loan Program:

On Monday, June 8, 2020, the Federal Reserve Board decided to expand the Main Street Loan Program to give small and medium-sized businesses the ability to receive support. The Main Street Lending Program should be open soon for lender registration.

Some of the recent changes include:

The minimum loan amount has been reduced to $250K.
- Making the EBITDA minimum $62,500 with no debt.
Increased the maximum loan size
They have extended the loan term from 4 years to 5 years.
The principal payment has been delayed to 2 years, with the repayment schedule being as follows for all loan types:
- Y1: 0% Y2: 0% Y3: 15% Y4: 15% Y5:70%
They have raised the FEDs participation to 95% for all loans.

Jerome H Powell, the Federal Reserve Chair, explained this decision by saying “supporting small and mid-sized businesses so they are ready to reopen and rehire workers will help foster a broad-based economic recovery.” This infers, these businesses are essential to the economy and employment in the United States.

When a lender registers for the MSLP, they are encouraged to start making loans immediately. This program is intended to purchase 95% of eligible loans, if documentation is complete and the transactions are consistent with the Main Streets facility’s requirements. Therefore, Loans originated under the previous terms will be accepted if they are funded before June 10, 2020.

There are a few loan options available within the Main Street Lending Program. These options include:

New Loans:
- These loans have a 5-year term
- With a $250,000 minimum loan amount
- With a maximum loan size of $35M, or an amount added to outstanding or undrawn available debt does not exceed 4.0x the adjusted EBITDA.
- Hold a risk retention of 5%
- Have a principal deferred for 2 years with years 3-5- 15%, 15%, 70%
- Interest payments deferred for one year
- A LIBOR rate of +3%
Priority Loans:
- These loans have a 5-year term
- With $250,000 minimum loan amount
- Consist of maximum loan size of $50M, or an amount added to outstanding or undrawn available debt does not exceed 6.0x the adjusted EBITDA.
- Hold risk retention of 5%
- Principal deferred for 2 years with years 3-5- 15%, 15%, 70%
- Interest payments deferred for one year
- Have a LIBOR rate of +3%
Expanded Loans:
- These loans have a 5-year term
- With a $10M minimum loan amount
- With a maximum loan size of $300M, or an amount added to outstanding or undrawn available debt does not exceed 6.0x the adjusted EBITDA.
- Have a risk retention of 5%
- Principal deferred for 2 years with years 3-5- 15%, 15%, 70%
- Interest payments deferred for one year
- Have LIBOR rate of +3%