Main Street Lending Program Definition

What is the Main Street Lending Program?

The main street loan 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 $600 billion in loan facilities available to employers, who had to be in good financial health before the COVID-19 crisis began. To encourage banks to lend, the Fed purchased 95% of new or existing loans from qualified employers, while the issuing bank retained 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 November 19, 2020, Treasury Secretary Steven Mnuchin said he would not allow the Main Street Lending Program to be extended again after December 31, 2020. However, the Fed extended the program until December 8, 2020. January 2021 to process loans that were submitted on or before December 14, 2020. The program ended on January 8, 2021.

How the Main Street Loan Program Worked

The Main Street Lending Program offered loans to eligible employers with a repayment term of five years. The interest rate is the London Interbank Offered Rate (LIBOR) plus 3%. Interest payments have been deferred for one year. Principal payments were deferred for the first two years. The borrower was to repay 15% in the third and fourth years, and the remaining 70% was to be repaid in the final year.

To be eligible, a business must have met the following requirements:

Main Street Loan Program vs. Paycheck Protection Program (PPP)

Businesses that participated in the PPP could also have applied for loans from the Main Street Loan Scheme. The banks have allowed borrowers to exclude PPP loans up to $2 million under certain circumstances when determining the maximum loan amount. Employers who took out loans had to comply with restrictions on remuneration, shares redemptionsand dividend payments that apply to loan programs under the CARES Act.

The Main Street Loan Scheme was intended to keep businesses operational and workers on the payroll. For loans under $250,000, the Fed waived the 1% fee it collected, and banks were allowed to double the fee it charged borrowers to 2% for making smaller loans.

Special Considerations

Expansion to include nonprofit organizations

On July 17, 2020, the Fed expanded the program to include nonprofit organizations.

To be eligible, the association must have fulfilled the following conditions:

• It was a 501(c)(3) or 501(c)(19) in continuous operation since January 1, 2015
• It had fewer than 15,000 workers or $5 billion or less in revenue in 2019
• It had at least 10 employees
• His endowment was less than $3 billion
• Its 2019 operating margin was above 2%
• Its income excluding donations represented at least 60% of expenditure in 2017-2019
• He had 60 days of cash on hand
• His cash and investments were equal to at least 55% of his debt and unused credit (including the loan amount from the main street loan program)
• He did not receive support under Subtitle A of Title IV of the CARES Act
• He did not participate in the PMCCF
• He was not ineligible for the PPP

Five-part program

The Main Street Lending Program was partially funded with $75 billion provided by the US Treasury under the CARES Act. The program consisted of five parts:

• The New Main Street Lending Facility (MSNLF)
• The Main Street Priority Lending Facility (MSPLF)
• The Main Street Extended Lending Facility (MSELF)
• The New Non-Profit Lending Facility (NONLF)
• The Extended Nonprofit Lending Facility (NOELF)

Businesses and non-profit employers could participate in only one of the above programs.

New Main Street Lending Facility

Under the new Main Street lending facility, the Fed would buy not guaranteed 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 October 30, 2020 adjustment by the Fed under the terms of the plan). The maximum was the lesser of $35 million or such amount which, added to the company’s debt, did not exceed four times its 2019 earnings before interest, taxes, depreciation and amortization (EBITDA).

Main Street Priority Lending Facility

The Main Street Senior Loan Facility was also for loans issued on or after April 24, 2020. The minimum loan value was $100,000. The maximum was the lesser of $50 million or such amount which, together with current debt, did not exceed six times the company’s 2019 EBITDA.

Main Street Expanded Lending Facility

The expanded Main Street loan facility was for loans issued before April 24, 2020. The minimum loan value was $10 million. The maximum was the lesser of $300 million, or an amount that, together with the company’s outstanding debt and available debt, did not exceed six times its 2019 EBITDA.

New loan facility for non-profit organizations

The New Nonprofit Lending Facility purchased new loans made after June 15, 2020 to U.S. nonprofits. Loans had a minimum amount of $100,000 (reduced from $250,000 as of October 30, 2020) and a maximum of $35 million or the nonprofit’s average quarterly income for 2019, depending on value the weakest.

Expanded Loan Facility for Non-Profit Organizations

For nonprofit organizations taking advantage of the Expanded Nonprofit Loan Facility, the minimum loan amount was $100,000 (reduced from the original $250,000 by the Fed’s readjustment of the October 30, 2020 above). The maximum for this was the lesser of $35 million or the borrower’s average quarterly income in 2019. The expanded loan facility for nonprofit organizations had a maximum loan amount of $10 million. The maximum for this was the lesser of $300 million or the borrower’s average quarterly income in 2019.

The Fed stopped buying loans under the Main Street Lending Program on January 8, 2021.