June 16, 2020

Main Street Lending Program Summary

By Kellan McConnell, Director, Assurance Services

The Main Street Lending Program is designed to provide financial support to small and medium-sized businesses by providing credit in order to maintain operations and payroll until conditions normalize.

The Main Street Lending Program is a $600 billion fund to encourage new loans or increase existing loans to smaller and medium-sized businesses that were unable to access the PPP or that require additional support in addition to the PPP loan. The Department of the Treasury will make a $75 billion equity investment in a Special Purpose Vehicle (Main Street SPV) which will partner with eligible lenders to make these loans to eligible borrowers through September 30, 2020. These loans are full recourse, are not forgivable and may be secured or unsecured. Non-profit organizations are currently not eligible, however more guidance will be forthcoming for these organizations.

Eligible lenders include U.S. federally insured depository institutions (including a bank, savings association, or credit union), a U.S. branch or agency of a foreign bank, a U.S. bank holding company, a U.S. savings and loan holding company, a U.S. intermediate holding company of a foreign banking organization, or a U.S. subsidiary of any of the foregoing.

The Main Street Lending Program provides for 3 separate borrowing facilities. Minimum eligibility requirements and loan terms are summarized in the chart below:

	MSNLF Main Street New Loan Facility	MSPLF Main Street Priority Loan Facility	MSELF Main Street Expanded Loan Facility
Loan Size	$250k – $35 Million (Previously $500k – $25 Million)	$250k – $50 Million (Previously $500k – $25 Million)	$10 Million – $300 Million (Previously $10 Million – $200 Million)
Minimum Eligibility Requirements (same for all 3 facilities)	The business must have been established prior to March 13, 2020 and have no more than 49% participation by foreign business entities The business is not an Ineligible Business as defined by SBA Must meet at least one of the following: 15,000 employees or fewer 2019 annual revenues of $5 billion or less (either on a GAAP basis or as reported to IRS) *Note that affiliation rules do apply for determining both items above. The business must be a US business (created or organized in the US) Must also have significant operations in and a majority of EE’s based in the US May only participate in one of the Main Street Facilities and must not also participate in the Primary Market Corporate Credit Facility (PMCCF) Must not have received other support under the CARES Act (PPP excluded) Borrower must be able to make certifications (see below)
Other Eligibility Requirements	N/A	N/A	To be eligible for upsizing: Existing facility was in place on or before 4/24/2020, and Must have remaining maturity of at least 18 months (lender may extend this at time of upsizing to meet this requirement)
Size Limitations	Total debt, outstanding and undrawn, (including MSNLF) must not exceed 4 times 2019 EBITDA	Total debt, outstanding and undrawn, (including MSPLF) must not exceed 6 times 2019 EBITDA	Cannot exceed (i) 35% of the existing outstanding and undrawn available debt that is equal to the MSELF and equivalent in secured status or (ii) Total debt (including MSELF) must not exceed 6 times 2019 EBITDA
Terms	5 year maturity (Previously 4) Interest payments deferred for 1 year (unpaid interest is capitalized). Principal payments deferred for 2 years. (Previously, interest + principal deferred for 1 year) Adjustable interest rate – LIBOR (1 or 3 month) + 300 basis points Repayment Schedule: Years 3-5; 15%, 15%, 70% (Previously, Years 2-4; 33% each year) Prepayment permitted without penalty Fees of 100bps will be assessed on both the lender and borrower (lender may pass fee to borrower)	5 year maturity (Previously 4) Interest payments deferred for 1 year (unpaid interest is capitalized). Principal payments deferred for 2 years. (Previously, interest + principal deferred for 1 year) Adjustable interest rate – LIBOR (1 or 3 month) + 300 basis points Repayment Schedule: Years 3-5; 15%, 15%, 70% (Previously, Years 2-4; 15%, 15%, 70%) Prepayment permitted without penalty Fees of 100bps will be assessed on both the lender and borrower (lender may pass fee to borrower)	5 year maturity (Previously 4) Interest payments deferred for 1 year (unpaid interest is capitalized). Principal payments deferred for 2 years. (Previously, interest + principal deferred for 1 year) Adjustable interest rate – LIBOR (1 or 3 month) + 300 basis points Repayment Schedule: Years 3-5; 15%, 15%, 70% (Previously, Years 2-4; 15%, 15%, 70%) Prepayment permitted without penalty Fees of 75bps will be assessed on both the lender and borrower (lender may pass fee to borrower)
Other Limitations	Cannot be subordinated to any other debt	Must be senior to or equal to other debt (other than mortgage debt)	Must be senior or equal to other debt (other than mortgage debt)
Borrower Certifications	Cannot prepay any other debt (principal or interest) until MSL is paid off entirely Cannot seek to reduce or cancel any existing debt or credit lines Reasonable basis to believe have the ability to remain solvent for at least the next 90 days (no expected bankruptcy filings) Must commit that it will follow compensation, stock repurchase, and capital distribution restrictions that apply to direct loan programs under section 4003(c)(3)(A)(ii) of the CARES Act, except that an S corporation or other tax pass-through entity that is an Eligible Borrower may make distributions to the extent reasonably required to cover its owners’ tax obligations in respect of the entity’s earnings.	Cannot prepay any other debt (principal or interest) until MSL is paid off entirely (borrower can refinance debt to Eligible Lender) Cannot seek to reduce or cancel any existing debt or credit lines Reasonable basis to believe have the ability to remain solvent for at least the next 90 days (no expected bankruptcy filings) Must commit that it will follow compensation, stock repurchase, and capital distribution restrictions that apply to direct loan programs under section 4003(c)(3)(A)(ii) of the CARES Act, except that an S corporation or other tax pass-through entity that is an Eligible Borrower may make distributions to the extent reasonably required to cover its owners’ tax obligations in respect of the entity’s earnings.	Cannot prepay any other debt (principal or interest) until MSL is paid off entirely Cannot seek to reduce or cancel any existing debt or credit lines Reasonable basis to believe have the ability to remain solvent for at least the next 90 days (no expected bankruptcy filings) Must commit that it will follow compensation, stock repurchase, and capital distribution restrictions that apply to direct loan programs under section 4003(c)(3)(A)(ii) of the CARES Act, except that an S corporation or other tax pass-through entity that is an Eligible Borrower may make distributions to the extent reasonably required to cover its owners’ tax
Retaining Employees	Eligible Borrowers should make commercially reasonable efforts to retain employees during the term of the MSNLF Loan, MSPLF Loan, or MSELF Upsized Tranche. Specifically, an Eligible Borrower should undertake good-faith efforts to maintain payroll and retain employees, in light of its capacities, the economic environment, its available resources, and the business need for labor. Borrowers that have already laid-off or furloughed workers as a result of the disruptions from COVID-19 are eligible to apply for Main Street loans.