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Main Street Lending Program — everything you need to know
Low-interest loans starting at $100,000 for small and midsize businesses affected by the COVID-19 pandemic.
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The federal government regularly revises the details of these programs as the coronavirus outbreak affects more businesses. We’ll update this page regularly as new information unfolds.
The Federal Reserve’s Main Street Lending was originally designed to serve small and midsize businesses that couldn’t qualify for other stimulus funding, like the Paycheck Protection Program (PPP). But it’s undergone several changes since its launch to make it more of a substitute for PPP funding as small businesses wait for more stimulus funding.
Main Street Lending Program at a glance
- Loan amounts: $100,000 to $300 million, depending on the program and your 2019 earnings
- Rates: LIBOR + 3%
- Fees: Origination fee of 0% to 2%, potential 1% facility fee on new loans
- Terms: 5 years
- Deferment: 1 year
- Basic eligibility criteria: No more than 15,000 employees or $5 billion in annual revenue
What is the Main Street Lending Program?
The Main Street Lending Program is a series of government loan programs from the Federal Reserve for small and midsize businesses struggling during the coronavirus outbreak. Under this program, eligible businesses can apply for a new loan or to have more funds added to a current loan through one of five programs.
Who qualifies?
Qualifications depend on the program that you end up using. The Main Street New Loan Facility (MSNLF), Main Street Priority Loan Facility (MSPLF) and Main Street Expanded Loan Facility (MSELF) all have the same requirements. The two nonprofit programs — Nonprofit Organization New Loan Facility (NONLF) and Nonprofit Organization Expanded Loan Facility (NOELF) — have a separate set of requirements.
MSNLF, MSPLF and MSELF qualifications
Businesses must meet the following requirements to qualify for a loan through these three programs:
- No more than 15,000 employees or $5 billion in annual revenue
- Established before March 13, 2020
- Currently in business
- Created and operating in the US
- Majority of employees based in the US
- No loans through the Primary Market Corporate Credit Facility (PMCCF) loan program
- No current loans in any of the other programs under Main Street Lending Program
- Not a members of Congress or restricted from borrowing under the CARES Act, aside from PPP and EIDL
NONLF and NOELF qualifications
To qualify for these two programs, your business must:
- No more than 15,000 employees or $5 billion in annual revenue
- At least 10 employees
- In business continuously since January 1, 2015
- Created and operating in the US
- Majority of employees based in the US
- Funding of less than $3 billion
- Revenue outside of donations totaling at least 60% of expenses from 2017 to 2019
- No current loans in any of the other programs under Main Street Lending Program
- Not a members of Congress or restricted from borrowing under the CARES Act, aside from PPP and EIDL
You may also need to meet other earnings and cash standards.
Main Street Lending borrower commitments
If you take out a loan through the Main Street Lending Program, your business must commit to refraining from the following until one year after your business pays off the loan:
- Buying equity security from the business or a parent company
- Paying dividends or making other capital distributions
- Paying a higher compensation to an employee or officer who earned an annual compensation of over $425,000 in 2019
- Paying severance equal to more than twice the annual compensation of employees or officers who earned over $425,000 in 2019
- Paying over $3 million to employees and officers who earned that amount in total compensation for 2019
- Paying more than 50% of any compensation over $3 million to employees who earned over $3 million in 2019
How much can I borrow?
Currently, loans start at $100,000 for MSNLF, MSPLF and NONLF. And they start at $10 million for the MSELF and NOELF programs.
The maximum amount also depends on the program and your 2019 earnings before interest, taxes, depreciation and amortization (EBITDA) — not including PPP loans under $2 million — or average quarterly revenue.
Maximum loan amounts
| Loan program | Maximum loan amount |
|---|---|
| MSNLF | $35 million or 4 times your EBITDA, whichever is less |
| MSPLF | $50 million or 6 times your EBITDA, whichever is less |
| MSELF | $300 million or 6 times your EBITDA, whichever is less |
| NONLF | $35 million or your average 2019 quarterly revenue, whichever is less |
| NOELF | $300 million or your average 2019 quarterly revenue, whichever is less |
Let’s take a look at an example …
Say you are applying for MSNLF and had a business that earned $1 million in EBITDA for 2019. Without any loans in the works, the maximum you could borrow is $4 million.
However, say you were approved for a Paycheck Protection Loan of $150,000, but haven’t received the funds yet.
In that case, you’d have to subtract the $150,000 from the $4 million, leaving you with a maximum loan amount of $3.85 million.
How much does it cost?
Three main factors affect how much this loan program costs — the interest rate, fees and loan term.
Interest rates
Main Street Lending Program loans come with a variable interest rate of the one or three month LIBOR plus 3%. Since the LIBOR rate is calculated each night and reported every month or three months depending on the average used, there’s a strong amount of variation — which can make calculating your total cost difficult.
Fees
All programs come with a number of fees.
- MSNLF, MSPLF and NONLF. Each of these programs has an origination fee of 1% on loans over $250,000 and 2% on loans under $250,000.
- MSELF and NOELF. Both programs have a fee referred to as an upsize fee of 0.75% of the amount difference.
Other fees you may incur are servicing and transaction fees — these also vary by loan but don’t exceed 1% each.
Terms
Main Street Loans come with a five-year term, with the option of deferment for the first year. If interest isn’t paid during the first year, it will be capitalized.
Where can I get a Main Street Loan?
The Federal Reserve Bank of Boston has a tool for finding banks that provide Main Street Loans. Simply select your state using the interactive map to find out which lenders are working with the program. Each also lists whether the lender is providing loans to for-profit businesses or nonprofits.
How do I apply?
You can apply by submitting an application directly through an eligible lender. Contact the lender you’d like to work with after familiarizing yourself with the program you’re interested in.
Don’t have time to wait? Apply for an online business loan today
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How can I use the funds?
The Federal Reserve requires businesses to primarily use the funds to cover payroll costs and retain employees, though there are no specific guidelines on which portion of the loan should go toward those expenses.
You can’t use the loan to refinance a loan or line of credit, or make debt payments.
How do repayments work?
Borrowers make repayments directly to the lender, which then pays the SVP its portion of the loan. These loans come with monthly repayments, which begin one year after your loan is disbursed.
Since there’s no prepayment penalty, consider starting repayments as soon as possible during the deferment period to save on interest.
How does it compare to the Paycheck Protection Program?
The Main Street Loan Program offers higher loan amounts, as well as fewer eligibility restrictions on who can qualify and how you spend your funds — though it’s mainly intended to cover payroll costs. It’s also available to larger businesses than the SBA’s Paycheck Protection Program (PPP).
However, it comes with a higher rate that’s variable, which makes it more difficult to predict the cost than the PPP’s fixed interest rate. It also doesn’t come with the option for forgiveness, which you can get with the PPP. And while the Main Street Loan Program’s terms and deferment period are longer, making repayments more affordable, both can also lead to a higher loan cost.
Are Main Street Loans a viable Plan B to Paycheck Protection Loans?
3 tips for borrowing through the Main Street Loan Program
Here are a few pointers to make the most of this loan program:
- Consider applying through your bank. Having an existing relationship with your lender can make it easier for you to qualify for this loan, especially during the beginning of the program.
- Check for updates. It’s possible that the Federal Reserve will make extensive changes to how this program works, even after it launches. Check back on this page often — we’ll continue to update it as new details emerge.
- Calculate your projected revenue a year from now. Try to only take out a loan with monthly payments that you believe your business can reasonably cover based on your projected revenue a year from now, when repayments begin.
Bottom line
The Main Street Lending Program can be a helpful option for businesses that are too large to qualify for an SBA loan. But its high minimum loan amount and relatively high rates for a coronavirus assistance loan make it one of the more expensive government financing options out there.
Read our guide to business loans during the COVID-19 outbreak to learn about more of your options.
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