Federal Reserve Opens Up Main Street Lending Program

BY Alex Ayers
7/9/2020 - HVAC Government Affairs

This week the Federal Reserve opened up lending via banks for the Main Street Lending Program (MSLP). MSLP is a loan program for businesses affected by the economic recession caused by COVID-19. Unlike the Paycheck Protection Program, MSLP is not a forgivable loan, but is open to medium sized businesses. Under the program the Federal Reserve backs up 95% of the loan amount to small or medium sized businesses to ensure credit is extended to businesses in need.

The program is limited to small and medium sized businesses, those with fewer than 15,000 employees and less than $5 billion in 2019 revenues. MSLP is split into three loan systems: new loans, priority loans, and expanded loans. New and priority loans are new loans while the expanded loans build on existing credit lines. New loans can range from $250,000 to $35 million, priority loans range from $250,000 to $50 million, and expanded loans range from $10 million to $300 million. The maximum loan amount is calculated based on the EBITDA of the company, four times EBITDA for new loans and six times for priority and expanded loans.

The loans have a 5-year term and the interest rate is adjustable using LIBOR plus 300 basis points. Principal payment is deferred for 2-years and interest is deferred for one year and businesses can repay the loans early without penalty. Loans are available through participating lenders, the Federal Reserve has posted a list of available lenders here. The list of participating institutions is still limited.

The program allows for loans to be originated from now until September 30, 2020. More information on specific terms can be found here.

We will continue to update you as we receive more information about COVID related loan programs. Please reach out to Alex Ayers with any questions.