Main Street Lending Program: Catch up on recent expansions, guidance for PPP borrowers

    Updated from insights originally published June 10, 2020

    Since introducing it in early April, the Federal Reserve Board has continued to expand its Main Street Lending Program (MSLP) to a wider range of businesses impacted by COVID-19.

    MSLP loans are available in three types – New, Priority, and Expanded – to businesses with up to 15,000 employees or up to $5 billion in annual revenue. 

    There were also two options (New and Expanded) introduced in July for nonprofit organizations such as hospitals, educational institutions, and social service organizations. To qualify, nonprofits must be tax-exempt organizations as described in Internal Revenue Code (IRC) section 501(c)(3) or 501(c)(19), among other requirements.

    “To date, the Main Street program has made almost 400 loans totaling $3.7 billion, providing support to businesses from a wide range of industries,” said an Oct. 30 Board release.

    Latest MSLP terms and updates

    In their late October release, in order “to better target support to smaller businesses,” the Board reduced the minimum loan size for New and Priority loans to $100,000, down from $250,000. (For Expanded loans, it remains at $10 million.)

    Transaction, origination, and servicing fees were also adjusted for smaller loans (under $250,000).

    Other loan terms in place since the summer remain unaffected, such as these that apply to all types:

    • The loan term is five years.
    • Principal repayments are deferred for two years, then 15%, 15%, and 70% in years 3-5, respectively. 
    • Interest payments are deferred for one year.
    • The maximum loan size for each type is the lesser of 1) a set amount and 2) a calculated amount based on 2019 adjusted EBITDA (for for-profit businesses) or average 2019 quarterly revenue (for nonprofits).

    For more details and term sheets for each loan type, see the full release.

    Factoring Paycheck Protection Program (PPP) loans into MSLP

    At the same time as the above expansion, the Board and the Treasury also issued an FAQ piece to clarify whether Paycheck Protection Program (PPP) loans count as “existing outstanding and undrawn available debt” when calculating maximum MSLP loan sizes. 

    Eligible borrowers and lenders can exclude PPP debt “provided that the Eligible Borrower, together with its affiliates (as defined for purposes of the PPP), received PPP loans with original principal amounts totaling less than $2 million.” The amount to be excluded generally should correspond with the “Forgiveness Amount” reported on the borrower’s PPP forgiveness application, or, if they have not yet applied, the amount that the borrower’s “principal executive officer has a reasonable, good-faith basis to believe will be forgiven in accordance with applicable PPP requirements.”

    See the full FAQ for more information, including documentation requirements and treatment of amounts deemed ineligible for forgiveness. 

     

    To learn more about the MSLP and other government lending programs for coronavirus-impacted businesses, contact your CohnReznick representative.

    Visit our Coronavirus Resource Center for news on tax and legislative updates, as well as industry-specific resources and strategies to help your organization deal with disruption brought on by the pandemic.

    Subject matter expertise

    • Claudine Cohen

      Managing Principal, Value360 Practice

    • Jeremy Swan

      Managing Principal - Financial Sponsors & Financial Services Industry

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    Any advice contained in this communication, including attachments and enclosures, is not intended as a thorough, in-depth analysis of specific issues. Nor is it sufficient to avoid tax-related penalties. This has been prepared for information purposes and general guidance only and does not constitute legal or professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice specific to, among other things, your individual facts, circumstances and jurisdiction. No representation or warranty (express or implied) is made as to the accuracy or completeness of the information contained in this publication, and CohnReznick LLP, its partners, employees and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.