Small- and Mid-Size Businesses to Receive More Relief Under Main Street Lending Program by Joel Glick, CPA/CFF, CFE, CGMA

Posted on June 15, 2020 by Joel Glick

The Federal Reserve Bank has again revised the scope of its Main Street Lending Program, introduced in April to help support small and mid-size businesses suffering under the economic strain of the COVID-19 health crisis.

The most recent guidance, issued on June 8, lowers the minimum loan amount, raises the maximum loan limit and extends the terms of the loan repayment period. While these changes are welcome news to struggling businesses, the Fed has not yet announced a timeline for opening the program to lenders and eligible borrowers.

 Borrower Requirements

According to the Fed, the Main Street Lending Program will apply to small and mid-size U.S. businesses with 15,000 employees or fewer, or to those businesses with 2019 revenue of $5 billion or less.

All qualifying companies must be for-profit entities, established before March 13, 2020, with “significant operations” and “a majority” of their employees located in the U.S. When businesses have foreign operations, they will need to aggregate revenue and the number of qualifying full-time, part-time, and temporary employees across their foreign and domestic affiliates.

All borrowers must certify they will use loan proceeds to retain employees and maintain payroll, and follow compensation, stock repurchase and capital distribution restrictions that apply to direct loan programs under the CARES Act. Moreover, they must reasonable efforts to maintain payroll and retain employees during the time the upsized tranche of the loan is outstanding.

While lenders do not have to independently verify borrowers’ eligibility for Main Street loans, they will be required to abide by their underwriting standards to make the final determination of loan approval.

Loan Types and Terms

The Main Street Lending Program will consist of three separate loan facilities:

While each of these loans may differ in size, risk retention and existence of borrower’s other loans and debt instruments, all three now have a five-year maturity date (previously four years) with interest rates based on LIBOR plus 30 basis points. In addition, borrowers may defer interest payments for one year and principal payments for two years.

At the end of years three and four, borrowers will be required to repay 15 percent of loan principal, respectively, with the remaining 70 percent payable at the end of year five.

Loan Size

The size of the loan available to eligible borrowers depends on the type of loan facility.

For new loans under the MSNLF, the minimum amount available is $250,000 (previously $500,000). The maximum amount is the lesser of:

Priority loans under the MSPLF have a $250,000 minimum (previously $500,000) with a maximum of the lesser of:

Expanded loans under the MSELF start at $10 million and can reach as high as the lesser of

Interaction with the SBA’s Payroll Protection Program

The Fed explained that businesses receiving loans under the SBA’s payroll protection program (PPP) may also qualify for a Main Street loan only when they make “reasonable efforts” to maintain their payroll and retain employees during the term of loan.

About the Author: Joel Glick, CPA/CFF, CFE, CGMA, is a director with Berkowitz Pollack Brant’s Forensic and Advisory Services practice, where he consults with businesses and works on fraud and forensic investigations and matters involving economic damages and insolvency while also serving as an expert witness in state and federal courts. He can be reached at the Miami CPA firm’s office at 305-379-7000 or