Yesterday, the Federal Reserve expanded its Main Street Lending Program (the “Program”) by amending its terms in an effort to reach more small and medium-sized businesses. See our prior client alerts for general information about the Program, specific information on prior revisions to the terms of the Program and information on recent guidance from the Federal Reserve Bank of Boston.
The changes to the Program include the following:
- Lowering the minimum loan size for new loans and priority loans to $250,000 from $500,000;
- Increasing the maximum loan size under all Program facilities: from $25 million to $35 million for the New Loan Facility; from $25 million to $50 million for the Priority Loan Facility; and from $200 million to $300 million for the Expanded Loan Facility;
- Increasing all loan terms to five years from four years;
- Extending the repayment period for all loans by deferring principal payments for two years, rather than one;
- Changing the principal repayment schedule on the New Loan Facility from 1/3 in each of the second, third and fourth years, to 15% in year three, 15% in year four, and 70% in year five; and
- Raising the Federal Reserve’s participation to 95% for all loans.
Under each Program facility, the interest rate will remain at LIBOR + 3%, interest payments will continue to be deferred for one year, and eligible businesses must still have no more than 15,000 employees or 2019 annual revenues of no more than $5 billion.
The Federal Reserve expects to begin lender registration soon and to begin buying loans shortly afterwards. The Program will also accept loans that were originated under the previously announced terms, if funded before June 10, 2020. The terms of each of the facilities can be found at the following links: New Loan Facility, Priority Loan Facility, and Expanded Loan Facility.
