Main Street Lending Program
On April 9, 2020, the Federal Reserve announced the preliminary details of the Main Street Lending Program enacted through the CARES Act. The program will be available to borrowers with fewer than 10,000 employees or less than $2.5 billion in revenue. Lenders will be able to originate new loans (the “Main Street New Loan Facility”) or utilize the program to increase existing loans with borrowers (the “Main Street Expanded Loan Facility”). The loans will have a four-year term and will charge interest rates of SOFR + 250-400 basis points, with principal and interest payments deferred for the first year. The principal amounts for the loans will be based on the Borrower’s EBITDA with a cap of $25 million for loans made under the Main Street New Loan Facility and a cap of $150 million for loans under the Main Street Expanded Loan Facility. Borrowers under the Main Street Lending Program must commit to making reasonable efforts to maintain their workforce and must also comply with compensation, stock repurchase and dividend restrictions. Borrowers with existing Paycheck Protection Program loans will still be eligible for loans made through the Main Street Lending Program.
The Federal Reserve has committed to purchasing up to $600 billion worth of loans created under the Main Street Lending Program. The details and implementation of the Main Street Lending Program are still being finalized by the Federal Reserve and the Treasury Department. As additional details become available, Koley Jessen will continue to provide updates on the program. The fact sheets prepared by the Federal Reserve for both the Main Street New Loan Facility and Main Street Expanded Loan Facility can be found here: Main Street New Loan Facility and Main Street Expanded Loan Facility.
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