Michael Boyle is an experienced financial professional with more than 10 years working with financial planning, derivatives, equities, fixed income, project management, and analytics.
Part of the Series A Guide to U.S. Coronavirus Stimulus Packages and Relief MeasuresMonetary Policy Programs
CURRENT ARTICLEInternational Stimulus Efforts
The Main Street Lending Program was run by the Federal Reserve System (Fed) to support small- and medium-sized businesses and nonprofit employers impacted by the COVID-19 pandemic.
The program made available $600 billion in loan facilities to employers, who must have been in good financial standing prior to the onset of the COVID-19 crisis. To encourage banks to lend, the Fed bought 95% of new or existing loans to qualified employers, while the issuing bank kept 5% to discourage irresponsible lending. In exchange for the loan, employers must have made reasonable efforts to maintain payroll and retain workers. The Fed announced the Main Street Lending Program on April 9, 2020.
On Nov. 19, 2020, Treasury Secretary Steven Mnuchin said he would not reauthorize extending the Main Street Lending Program past Dec. 31, 2020. However, the Fed extended the program to Jan. 8, 2021, to process loans that were submitted on or before Dec. 14, 2020. The program ended on Jan. 8, 2021.
The Main Street Lending Program offered loans to eligible employers with a five-year repayment term. The interest rate is the London Interbank Offered Rate (LIBOR) plus 3%. Interest payments were deferred for one year. Principal payments were deferred for the first two years. The borrower had to repay 15% in the third and fourth years, and the remaining 70% was due in the final year.
To have been eligible, a business must have met requirements that included the following:
Companies that participated in the PPP also could have applied for Main Street Lending Program loans. Banks allowed borrowers to exclude PPP loans of up to $2 million under certain circumstances when determining the maximum loan amount. Employers taking loans had to follow restrictions on compensation, stock buybacks, and dividend payments that apply to loan programs under the CARES Act.
The Main Street Lending Program was intended to keep businesses operational and workers on the payroll. For loans below $250,000, the Fed waived the 1% point fee that it collected, and banks were allowed to double to 2% the fees that it charged borrowers to make smaller loans.
On July 17, 2020, the Fed expanded the program to include nonprofit organizations.
To have been eligible, the nonprofit must have met the following requirements:
The total amount that the Main Street Lending Program had lent across nearly 400 loans, as of Oct. 30, 2020.
The Main Street Lending Program was partly funded with $75 billion provided by the U.S. Treasury under the CARES Act. The program consisted of five parts:
Businesses and nonprofit employers could participate in just one of the above programs.
Under the Main Street New Loan Facility, the Fed would buy unsecured term loans originated on or after April 24, 2020. The minimum loan value was changed to $100,000 (reduced from the original $250,000 by an Oct. 30, 2020, adjustment by the Fed in the terms of the plan). The maximum was the lesser of $35 million or an amount that, when added to the company’s debt, didn’t exceed four times its 2019 earnings before interests, taxes, depreciation, and amortization (EBITDA).
The Main Street Priority Loan Facility was also for loans originated on or after April 24, 2020. The minimum loan value was $100,000. The maximum was the lesser of $50 million or an amount that, when added to current debt, didn’t exceed six times the company’s 2019 EBITDA.
The Main Street Expanded Loan Facility was for loans originated before April 24, 2020. The minimum loan value was $10 million. The maximum was the lesser of $300 million, or an amount that, when added to the company’s outstanding and available debt, didn’t exceed six times its 2019 EBITDA.
The Nonprofit Organization New Loan Facility bought new loans made after June 15, 2020 to U.S. nonprofits. The loans had a minimum size of $100,00 (reduced from an original $250,000 on Oct. 30, 2020) and a maximum of $35 million or the nonprofit's average quarterly revenue for 2019, whichever was smaller.
For nonprofits taking advantage of the Nonprofit Organization Expanded Loan Facility, the minimum loan size was $100,000 (reduced from the original $250,000 by the aforementioned Oct. 30, 2020, Fed readjustment). The maximum for this was the lesser of $35 million or the borrower’s average 2019 quarterly revenue. The Nonprofit Organization Expanded Loan Facility had a $10 million loan maximum size. The maximum for this was the lesser of $300 million or the borrower’s average 2019 quarterly revenue.
The Fed stopped buying loans under the Main Street Lending Program on Jan. 8, 2021.