Federal Reserve’s new Main Street Lending Program updates include longer loan term, expanded size
Just over a month since its last update, the Federal Reserve Board has announced another expansion of its Main Street Lending Program to support more businesses affected by the COVID-19 pandemic.
The program offers three types of loan: New, Priority, and Expanded. Businesses with up to 15,000 employees or up to $5 billion in annual revenue are eligible.
This round of refinements includes:
- Lengthening the term for all loan types to 5 years
- Lowering the minimum loan size for New and Priority loans to $250,000
- Modifying and standardizing principal repayment for all loan types, including deferring principal payments for two years. Interest payments are also deferred for one year for all types.
- For maximum loan size, which for each type is the lesser of 1) a set amount and 2) a calculated amount based on 2019 adjusted EBITDA, the set amount has been raised for all three.
The Board also noted that it is working to establish a program for nonprofit organizations.
For more changes, details, and term sheets for each loan type, see the full release.
“I believe these recent changes should expand and make the scope of the program broader, but the ultimate factor will be the participation of the banks,” notes Bob Moss, CohnReznick’s National Director of Governmental Affairs.
In their release, the Board says, “Once [lenders] have successfully registered for the program, [they] are encouraged to begin making Main Street loans immediately. The Main Street Lending Program intends to purchase 95% of each eligible loan that is submitted to the program, provided that the required documentation is complete and the transactions are consistent with the relevant Main Street facility's requirements. The Main Street Lending Program will also accept loans that were originated under the previously announced terms, if funded before June 10, 2020.”
For more information on the Main Street Lending Program, see the Fed’s updated program Frequently Asked Questions.
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