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Federal Reserve Board expands its Main Street Lending Program

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Insights  <  Federal Reserve Board expands its Main Street Lending Program

On June 8, 2020, just days away from the launch of its Main Street Lending Program, the Fed expanded the program to allow more small and medium-sized businesses to be able to receive support. The revisions to several program provisions are in response to feedback from a variety of sources. The program will open for lender registration “soon” and the Fed expects to be actively buying loans shortly thereafter. The Fed is also working to establish a program for nonprofit organizations.

The changes include:

  • Lowering the minimum loan size for the New Loan and Priority facility loans to $250,000 from $500,000;
  • Increasing the maximum loan size for all facilities;
  • Increasing the term of each loan facility to five years, from four years;
  • Extending the repayment period for all loans by delaying principal payments for two years, rather than one, while simultaneously delaying 70% principal payment to year five;
  • Deferring interest payments for one year; and
  • Raising the Reserve Bank’s participation to 95% for all loans.

The chart below summarizes the changes.

Further information about the program can be found in our initial article and an update issued in late May.

Main Street Lending Program Loan Options New Loans Priority Loans Expanded Loans
Term 5 years
(previously 4 years)
Minimum Loan Size $250,000
(previously $500,000)
$10M
Maximum Loan Size The lesser of $35M, or an amount that, when added to outstanding and undrawn available debt, does not exceed 4.0x adjusted EBITDA
(previously $25M)
The lesser of $50M, or an amount that, when added to outstanding or undrawn available debt, does not exceed 6.0x adjusted EBITDA
(previously $25M)
The lesser of $300M, or an amount that, when added to outstanding or undrawn available debt, does not exceed 6.0x adjusted EBITDA
(previously $200M)
Risk Retention 5% 5%
(previously 15%)
5%
Principal Repayment

Principal deferred for two years, years 3-5: 15%, 15%, 70%

(previously principal deferred for one year and 33.33% repayment due in years 2-4)

Principal deferred for two years, years 3-5: 15%, 15%, 70%

(previously principal deferred for one year and 15%, 15%, 70% repayment due in years 2, 3, and 4, respectively)

Interest Payments Deferred for one year
Rate LIBOR + 3%

 

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