For the past few months, most business loan conversations focused on the Paycheck Protection Program established due to the COVID-19 pandemic. On Monday, the Federal Reserve Bank of Boston opened lender registration for the Main Street Lending Program.
While there are similarities between the programs, Main Street was created to help credit flow to medium-sized and small businesses that were in sound financial condition, but now need loans to help until they have recovered from, or adapted to, the impacts of the COVID-19 pandemic. Each program was developed to provide liquidity to companies of different sizes.
- The PPP was established by the CARES Act and implemented by the Small Business Administration (SBA) to support the payroll and operations of small businesses through the issuance of government-guaranteed loans that include a forgiveness feature for borrowers that satisfy the requirements of the PPP.
- Main Street was designed by the Federal Reserve to support small and medium sized businesses that were unable to access the PPP or that require additional financial support after receiving a PPP loan. Main Street loans are full-recourse loans and are not forgivable.
Main Street Lending Program Criteria
U.S. businesses may be eligible for loans if they meet either of the following conditions:
(1) the business has 15,000 employees or fewer; or
(2) the business had 2019 revenues of $5 billion or less.
Loans issued under the Program would have a five-year maturity, deferral of principal payments for two years, and deferral of interest payments for one year.
Eligible lenders may originate new loans (under MSNLF and MSPLF) or increase the size of (or “upsize”) existing loans (under MSELF) made to eligible businesses.
Once the Program is operational, small and medium-sized businesses interested in the Program can apply for Program loans by contacting an eligible lender.
DISCLAIMER: The WM Daily Update COVID-19, COVID-19 Business Resources and COVID-19 Client News Alerts and other related communications are intended to provide general information on legislative COVID-19 relief measures as of the date of this communication and may reference information from reputable sources. Although our firm has made every reasonable effort to ensure that the information provided is accurate, we make no warranties, expressed or implied, on the information provided. As legislative efforts are still ongoing, we expect that there may be additional guidance and clarification from regulators that may modify some of the provisions in this communication. Some of those modifications may be significant. As such, be aware that this is not a comprehensive analysis of the subject matter covered and is not intended to provide specific recommendations to you or your business with respect to the matters addressed.