The Main Street Lending Program is run by the Federal Reserve System to support small and medium-sized businesses and non-profit employers impacted by the COVID-19 pandemic.

The program makes 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 Federal Reserve will buy 95% of new or existing loans to qualified employers, while the issuing bank will keep 5% to discourage irresponsible lending. In exchange for the loan, employers must make reasonable efforts to maintain payroll and retain workers. The Federal Reserve announced the Main Street Lending Program on April 9, 2020.

Key Takeaways

  • Under the Main Street Lending Program, the Federal Reserve purchases 95% of loans made to small and medium-sized businesses and non-profits.
  • Issuing banks must retain 5% of the loans.
  • The Fed will buy up to $600 billion in loans, with the U.S. Treasury contributing $75 billion.

Details on the Main Street Lending Program

The Main Street Lending Program offers to eligible employers loans with a five-year repayment term. The interest rate is LIBOR plus 3%. Interest payments are deferred for one year. Principal payments are deferred for the first two years. The borrower must repay 15% in the third and fourth years, and the remaining 70% is due in the final year.

To be eligible, a business must meet the following requirements:

Companies that participated in the PPP program may also apply for Main Street loans. Employers taking loans must follow restrictions on compensation, stock buybacks and dividend payments that apply to loan programs under the CARES Act.

The Main Street Lending Program is intended to keep businesses operational and workers on the payroll. On July 17, 2020, the Federal Reserve expanded the program to include non-profit organizations.

To be eligible, the nonprofit must meet the following requirements:

  • It is a 501(c)(3) or 501(c)(19) in continuous operation since January 1, 2015
  • With fewer than 15,000 workers, or less than $5 billion in 2019 revenue
  • It has at least 10 employees
  • Its endowment is less than $3 billion
  • Its 2019 operating margin is greater than 2%
  • Its non-donation revenues is at least 60% of 2017-2019 expenses
  • It has 60 days cash on hand
  • Its cash and investments equal at least 55% of its debt and unused credit (including the amount of the Main Street loan)
  • It did not receive support under Subtitle A of Title IV of the CARES Act
  • Nor did it participate in the Primary Market Corporate Credit Facility
  • It is not ineligible under PPP

The Main Street Lending Program is partly funded with $75 billion provided by the U.S. Treasury under the CARES Act. The program consists 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 New Loan Facility (NONLF)
  • The Nonprofit Expanded Loan Facility (NOELF)

Businesses and non-profit employers can participate in just one of the above programs. 

Under the Main Street New Loan Facility, the Federal Reserve will buy unsecured term loans originated on or after April 24, 2020. The minimum loan value is $250,000. The maximum is the lesser of $35 million or an amount that, when added to the company's debt, does not exceed four times its 2019 EBITDA.

The Main Street Priority Loan Facility is also for loans originated on or after April 24, 2020. The minimum loan value is $250,000, while the maximum is the lesser of $50 million or an amount that, when added to current debt, doesn't exceed six times the company's 2019 EBITDA.

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

For non-profits taking advantage of the Nonprofit Expanded Loan Facility, the minimum loan size is $250,000, while the maximum is the lesser of $35 million or the borrower's average 2019 quarterly revenue. The Nonprofit Expanded Loan Facility has a $10 million loan minimum. The maximum is the lesser of $300 million or the borrower's average 2019 quarterly revenue.

Unless extended, the Federal Reserve will stop buying loans under the Main Street Lending Program on December 31, 2020.