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06.05.2020 Opening of Main Street Lending Program with Improved Terms By: Charles W. Kemp & Laurence V. Parker, Jr.

On June 15, 2020, the Federal Reserve Bank of Boston announced the opening of the Main Street Lending Program for lender registration with the improved terms announced last week. The program is intended to benefit small and mid-sized businesses and will operate until September 30, 2020, unless extended by the Federal Reserve. 

Loans under the improved program will be geared toward businesses with (i) up to 15,000 employees or (ii) $5 billion or less in 2019 revenues. The program is divided into three categories that allow for a broader set of eligible borrowers and eligible terms summarized in the table below:

Main Street Lending Program Loan Options

New Loan
Facility

Priority Loan
Facility

Expanded Loan
Facility

Loan Term

5 years

Principal Payments

Principal deferred for two years. Years 3-5: 15%, 15%, 70%

Interest Payments

Deferred for one year

Interest Rate

Adjustable rate of LIBOR (1 or 3 mo.) plus 300 basis points

Loan Size

$250,000
to $35 million

$250,000
to $50 million

$10 million
to $300 million

Maximum Combined Debt to Adjusted 2019 EBITDA

4 times

6 times

6 times

Lender Participation Rate

5%

Fed Participation Rate

95%

Prepayment Allowed

Yes, without penalty

Business Size Limits

15,000 employees or fewer, or 2019 revenues of $5 billion or less

Fees

Origination and transaction fees may apply

Businesses that have received PPP loans are permitted to borrow under the program, provided they are otherwise eligible borrowers. 

The program may not be attractive for some lenders, and borrowers and interested parties should carefully consider the pros and cons of participating.

More details about the program, including program forms and FAQs published by the Federal Reserve Bank of Boston, are available on the Boston Fed’s website

Please note: This alert contains general, condensed summaries of actual legal matters, statutes and opinions for information purposes. It is not meant to be and should not be construed as legal advice. Readers with particular needs on specific issues should retain the services of competent counsel. 

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