By Jennifer Mailhes, Business Advisory Shareholder

On April 9, 2020, the Federal Reserve announced it is taking additional actions to provide for the purchase of up to $600 billion in loans through its new Main Street Lending Program. The program was designed to deploy loans to small and mid-sized businesses affected by the COVID-19 pandemic, especially those businesses not eligible for the Small Business Administration’s Paycheck Protection Program (PPP). Although, businesses that have taken advantage of the SBA PPP may also apply for Main Street Lending Program if they are eligible.

The Federal Reserve is seeking comments on this program through April 16, 2020, and consequently, the terms are subject to change. Specific timing information and other details about the application processes have not yet been released.

Loan Opportunities

Businesses approved for these loans will benefit from a low interest rate (secured overnight funding rate) plus 250-400 basis points and a four-year maturity. Amortization of principal and interest payments will also be deferred for one year. All loans are available with no prepayment fee or penalty. However, unlike the SBA’s PPP, loans provided under this program are not eligible for any forgiveness.

New loans originated on or after April 8, 2020, are eligible for the program and is available for a minimum loan amount of $1 million up to $25 million. The maximum available loan amount will depend on the lesser of either $25 million or an amount that does not exceed the business’s 2019 earnings  before interest, tax, depreciation and amortization (EBIDTA) by four times.

For upsizing existing loans that originated before April 8, 2020, the maximum amount is equal to the lesser of the following:

  • $150 million.
  • 30% of existing outstanding and committed, but undrawn bank debt.
  • An amount that does not exceed 2019 EBITDA by six times.

Leverage conditions could prevent highly leveraged businesses from participating. No guidance has been provided as to how EBITDA should be calculated, including whether any non-GAAP add-backs to EBITDA will be allowed for purposes of determining loan amounts under this program.


A business must meet the following requirements to qualify for a loan under the program:

  • Have up to 10,000 employees or up to $2.5 billion in 2019 annual revenues.
  • Was in good financial standing before the pandemic began.
  • Must be created and organized under the laws of the United States with significant operations in and a majority of its employees based domestically.
  • Use to maintain payroll and at least 90% of the workforce until Sept. 30, 2020. The loan may not be used to repay or refinance any other debt of the borrower.
  • Follow compensation, stock repurchase and dividend restrictions that apply to direct loan program under the CARES Act.

No guidance was provided as to whether affiliation rules may apply to these eligibility thresholds or how applicants must count their employees (e.g., full-time equivalents or full-time, part-time and other-basis employees like the SBA’s PPP requires).

How to Apply

Details to submit applications for loans under the Main Street Lending Program have not been released, but are expected to be soon with the comment period ending on April 16, 2020.

Helpful Resources

Doeren Mayhew will keep you updated as specifics regarding the program are clarified. You can also leverage summaries of the New Loan Facility and Expanded Loan Facility provided by the Federal Reserve to gain a better understanding of how the current program and lender guarantees work.

We recommend businesses contact their existing lenders to discuss their options. Should you need assistance in gathering financial information for the application process, our business advisors are here to help. Contact us today.