The Federal Reserve Bank of Boston (Reserve Bank) announced changes to the Main Street Lending Program (Program) to allow more small and medium-sized businesses to be able to participate in the Program. The changes are summarized below.
New Loans and Priority Loans
- Maturity: Five years (previously four years).
- Repayment: Interest payments are deferred for one year and principal payments are deferred for two years.
- Principal Amortization: Principal deferred for first two years, then 15% for years three and four and 70% at maturity.
- Minimum Loan Size: $250,000 (previously $500,000).
- Maximum Loan Size: $35 million for New Loans and $50 million for Priority Loans (both were previously $25 million). Note that such loans are still limited to four and six times, respectively, of the borrower’s adjusted 2019 EBITDA minus the borrower’s outstanding plus undrawn debt.
- SPV Participation: For Priority Loans, the Reserve Bank’s participation is increased to 95% from 85%.
Enhanced Loans
- Maturity: Five years (previously four years).
- Repayment: Interest payments are deferred for one year and principal payments are deferred for two years.
- Principal Amortization: Principal deferred for first two years, then 15% for years three and four and 70% at maturity.
- Maximum Loan Size: $300 million. Such loans are still limited to six times the borrower’s adjusted 2019 EBITDA minus the borrower’s outstanding plus undrawn debt. There is no longer a limit of 35% of the borrower’s pari passu outstanding plus undrawn debt.
The Reserve Bank’s press release also noted that lenders, after registering for the Program, are “encouraged to begin making Main Street loans immediately.” The Federal Reserve also stated that the Program will also accept loans that were originated under the previously announced terms, if funded before June 10, 2020.
