Main Street Lending Program: Who's Eligible

The Federal Reserve took additional steps to bolster the economy last Thursday, April 9, by making available an extra $2.3 trillion in loans to small and medium businesses. Of this amount, the Treasury designated $600 billion for the Main Street Lending Program, which is comprised of two separate but related arms: The Main Street New Loan Facility ("New Loans") and the Main Street Expanded Loan Facility ("Expanded Loans"). As with the Small Business Administration's Paycheck Protection Program loans, businesses should reach out to their banks or lenders to apply for one of these loans. But note that the minimum loan size is $1 million and the interest rate will be higher than on Paycheck Protection Program loans.

The Main Street Lending Program will enhance support for eligible borrowers that were in good financial standing before the crisis by offering four-year loans to companies employing up to 10,000 workers or with revenues of less than $2.5 billion. Principal and interest payments will be deferred for one year. Interest rates will be based on the Secured Overnight Financing Rate (SOFR) plus 2.5% to 4%, depending on the credit risk. Eligible lenders (banks) may originate new Main Street loans or use Main Street loans to increase the size of existing loans to businesses.

Businesses must attest that they require financing due to COVID-19 and will make reasonable efforts to maintain payroll and retain employees during the term of the loan. An important stipulation of the use of the loan is that the borrower may not use proceeds to repay or refinance pre-existing loans. Small businesses that participate in the SBA's Paycheck Protection Program may additionally take advantage of the Main Street Program.

Eligible New Loans are loans that originate on or after April 8, 2020. Expanded Loans refers to a term loan that originated before April 8, 2020 with an upsized tranche. Both types of loans must follow additional particular eligibility rules.

There is a 1% loan origination fee based on the principal amount of the loan, which will range from $1M to $25M. Additionally, these loans contain no provisions for forgiveness.

Additional required attestations must be agreed to before a loan is authorized. These attestations are similar for both types of loans, with the exact requirements for New Loans here and the exact requirements for Expanded Loans here.

Peter N. Riefstahl is a supervisor at Louis T. Roth & Co., PLLC, a Louisville, KY-based Certified Public Accounting firm that specializes in tax planning, accounting, and business consulting services.