What Is the Main Street Lending Program?

The Main Street Lending 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 available $600 billion in loan facilities to employers, who must have been in good financial standing prior to the onset of the COVID-19 crisis. To encourage banks to lend, the Fed bought 95% of new or existing loans to qualified employers, while the issuing bank kept 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 Nov. 19, 2020, Treasury Secretary Steven Mnuchin said he would not reauthorize extending the Main Street Lending Program past Dec. 31, 2020. However, the Fed extended the program to Jan. 8, 2021, to process loans that were submitted on or before Dec. 14, 2020. The program ended on Jan. 8, 2021.

Key Takeaways

  • Under the Main Street Lending Program, the Federal Reserve System (Fed) purchased 95% of loans made to small- and medium-sized businesses and nonprofits.
  • Issuing banks had to retain 5% of the loans.
  • The Fed bought up to $600 billion in loans, with the U.S. Treasury having contributed $75 billion.
  • The program ended on Jan. 8, 2021.

How the Main Street Lending Program Worked

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

To have been eligible, a business must have met requirements that included the following:

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

Companies that participated in the PPP also could have applied for Main Street Lending Program loans. Banks allowed borrowers to exclude PPP loans of up to $2 million under certain circumstances when determining the maximum loan amount. Employers taking loans had to follow restrictions on compensation, stock buybacks, and dividend payments that apply to loan programs under the CARES Act.

The Main Street Lending Program was intended to keep businesses operational and workers on the payroll. For loans below $250,000, the Fed waived the 1% point fee that it collected, and banks were allowed to double to 2% the fees that it charged borrowers to make smaller loans.

Special Considerations

Expansion to Include Nonprofit Organizations

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

To have been eligible, the nonprofit must have met the following requirements:

  • It was a 501(c)(3) or 501(c)(19) in continuous operation since Jan. 1, 2015
  • It had either fewer than 15,000 workers or $5 billion or less in 2019 revenue
  • It had at least 10 employees
  • Its endowment was less than $3 billion
  • Its 2019 operating margin was greater than 2%
  • Its non-donation revenues were at least 60% of 2017–2019 expenses
  • It had 60 days of cash on hand
  • Its cash and investments were equal at least 55% of its debt and unused credit (including the amount of the Main Street Lending Program loan)
  • It did not receive support under Subtitle A of Title IV of the CARES Act
  • It did not participate in the PMCCF
  • It was not ineligible under the PPP

$3.7 billion

The total amount that the Main Street Lending Program had lent across nearly 400 loans, as of Oct. 30, 2020.

Five-Part Program

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

  • The Main Street New Loan Facility (MSNLF)
  • The Main Street Priority Loan Facility (MSPLF)
  • The Main Street Expanded Loan Facility (MSELF)
  • The Nonprofit Organization New Loan Facility (NONLF)
  • The Nonprofit Organization Expanded Loan Facility (NOELF)

Businesses and nonprofit employers could participate in just one of the above programs.

Main Street New Loan Facility

Under the Main Street New Loan Facility, the Fed would buy unsecured 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 Oct. 30, 2020, adjustment by the Fed in the terms of the plan). The maximum was the lesser of $35 million or an amount that, when added to the company’s debt, didn’t exceed four times its 2019 earnings before interests, taxes, depreciation, and amortization (EBITDA).

Main Street Priority Loan Facility

The Main Street Priority Loan Facility was also for loans originated on or after April 24, 2020. The minimum loan value was $100,000. The maximum was the lesser of $50 million or an amount that, when added to current debt, didn’t exceed six times the company’s 2019 EBITDA.

Main Street Expanded Loan Facility

The Main Street Expanded Loan Facility was for loans originated before April 24, 2020. The minimum loan value was $10 million. The maximum was the lesser of $300 million, or an amount that, when added to the company’s outstanding and available debt, didn’t exceed six times its 2019 EBITDA.

Nonprofit Organization Expanded Loan Facility

For nonprofits taking advantage of the Nonprofit Organization Expanded Loan Facility, the minimum loan size was $100,000 (reduced from the original $250,000 by the aforementioned Oct. 30, 2020, Fed readjustment). The maximum for this was the lesser of $35 million or the borrower’s average 2019 quarterly revenue. The Nonprofit Organization Expanded Loan Facility had a $10 million loan maximum size. The maximum for this was the lesser of $300 million or the borrower’s average 2019 quarterly revenue.

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