By Sjur Midness
On April 30, 2020, the Federal Reserve announced that it is expanding the scope and eligibility for its Main Street Lending Program, a lending program designed to ensure credit flows to small and mid-sized businesses during the coronavirus pandemic. Under the previous terms, the Main Street Lending Program consisted of two facilities: the “Main Street New Loan Facility” (New Loan Facility) and the “Main Street Expanded Loan Facility” (Expanded Loan Facility).
The Federal Reserve has now added a third loan facility as an option for borrowers with greater leverage. While the terms of the “Main Street Priority Loan Facility” (Priority Loan Facility) are similar to the terms of the New Loan Facility, the lender would retain 15 percent (rather than five percent) of eligible loans where the borrower’s leverage ratio equals or is less than 6.0x (rather than 4.0x). The single special purpose vehicle established by the Federal Reserve (SPV) may purchase up to a total of $600 billion in eligible loans under all three facilities.
Notably, the Federal Reserve also expanded the eligibility criteria to include businesses with up to 15,000 employees and $5 billion in annual revenue, and decreased the minimum loan amount to $500,000 (from $1,000,000) for New Loan Facility and Priority Loan Facility loans.
This chart summarizes those and other key terms of the New Loan Facility, the Priority Loan Facility and the Expanded Loan Facility, as reflected in the April 30, 2020, term sheets provided by the Federal Reserve. Please note that the information provided in this chart supersedes the chart summarizing the Federal Reserve’s April 9, 2020, term sheets.