16 June 2020

Federal Reserve Seeks Feedback on Non-Profit Expansion of Main Street Lending Program

On June 15, 2020, the Federal Reserve (the Fed) announced that it is seeking public feedback on a proposal to expand its Main Street Lending Program (MSLP) to provide access to credit for non-profit organizations (NPOs).  Consistent with the already announced for-profit MSLP facilities, the Fed’s proposed expansion would offer loans to small and medium-sized NPOs that were in sound financial condition before the onset of the COVID-19 pandemic, but which could benefit from additional liquidity to manage through the challenges presented by COVID-19 and related economic fallout.

Loan terms under the proposed non-profit Main Street loans, including the interest rate, deferral of principal and interest payments, and five-year term, are the same as the corresponding for-profit MSLP loan terms. The minimum loan size would be $250,000 while the maximum loan size would be $300 million. Principal payments would be fully deferred for the first two years of the loan, and interest payments would be deferred for one year.  A chart summarizing the proposed MSLP non-profit loan options accompanies the Fed’s press release announcing the proposal:

The Fed also posted detailed proposed term sheets for each of the new loan facility and expanded loan facility options for NPOs.

Borrower eligibility requirements for the proposed NPO facilities would be modified from the for-profit facilities to reflect the operational and accounting practices of the non-profit sector and would include:

  • Minimum of 50 and maximum of 15,000 employees;
  • Financial thresholds based on operating performance, liquidity and ability to repay debt;
  • An operational history of at least five years; and
  • A limit on endowments of no more than $3 billion.

Eligibility would also be limited to tax-exempt organization under Section 501(c)(3) or Section 501(c)(19) of the Internal Revenue Code.

In its announcement, the Fed stated it is seeking public feedback on the proposed NPO facilities because the circumstances, structure and needs of non-profit organizations vary widely. Interested parties have until Monday, June 22, 2020, to submit their feedback.