01 May 2020

Main Street Lending Program: Federal Reserve Board Expanding Scope and Eligibility

***Information and guidance in client updates was up to date at time of publication. During the pandemic, information and guidance has been changing rapidly. If you have any questions about the information contained in a client update, please contact the author(s) or your Miller Johnson attorney.***

As part of an effort to support the economy during the COVID-19 pandemic, the Federal Reserve developed the Main Street Lending Program (MSLP) to assist small and medium-sized businesses that were financially sound before the pandemic. Since the Federal Reserve’s initial announcement of the MSLP and its preliminary proposed terms, changes have been made to expand the accessibility of the program to a broader range of borrowers.

Due to public feedback, the Federal Reserve announced on April 30, 2020 that it would expand the loan options available to businesses and increase the maximum size of eligible businesses. Changes include the following:

  • Creating a third loan option, with increased risk sharing by lenders for borrowers with greater leverage;
  • Lowering the minimum loan size for certain loans to $500,000; and
  • Expanding the pool of businesses eligible to borrow.

Under the new loan option, lenders would retain a 15 percent share, as opposed to the 5 percent share under the other MSLP loan options, on loans when added to additional adjustments. In total, three loan options, New, Priority, and Expanded, will be available for businesses.

Businesses with up to 15,000 employees or up to $5 billion in annual revenue are now eligible. This is in comparison to the initial program terms, which were exclusively for companies with up to 10,000 employees and $2.5 billion in annual revenue. The minimum loan size for two of the options is also lowered to $500,000 from $1 million.

The Federal Reserve believes that these changes will give more options to a larger population of eligible small and medium-sized businesses. Although no start date has been established for these new additions, an announcement is expected soon.

You can find the following documents at the included links:

The Miller Johnson team is here to assist you in evaluating these options while giving due consideration to your legal and business concerns.  Please contact your Miller Johnson lawyer to discuss these options and develop the best plan for your business.