Last updated on April 11, 2020
This new (not-yet-live) program announced by the Federal Reserve is designed to give medium-sized businesses (and some biggish small businesses) access to credit. Basically, the Fed will buy 95% of loans written by banks to companies that were fairly successful before COVID-19 hit, so long as the loans are a minimum of $1 million each, aren’t bigger than 4x the company’s 2019 EBIDTA, and are less than $25 million (if new credit facility) or $150 million (if extending existing credit facility).
- Who: The program is designed for medium-sized businesses with up to 10,000 employees or up to $2.5 billion in 2019 revenues
- What: 4 year loans with deferred payments for a year for between $1 million and $150 million
- When: Soon-ish
- Where: These loans will be written by banks, who will then sell 95% of the value to the Federal Reserve
- How: Banks will make these loans to customers, either as new loans (with a limit of $25 million) or by extending an existing loan (with a limit of $150 million), and then the Federal Reserve will purchase 95% of the loan from the bank to reduce the bank’s risk (making them more willing to lend) and to increase the amount of money the banks have to lend
- Why: While the PPP and SBA EIDL loans are designed to serve small businesses, and the Federal Reserve already had ways of backing the loans of large businesses, this program is designed to make sure that mama bear businesses have access to credit through this crisis
Places to Get Official Information
Start Here
- If you don’t have fancy accountants and lawyers to work on this stuff on your behalf, then this is probably not the lending program for you
- Federal Reserve Press Release describing the Main Street Lending Facility (and other actions the Fed is taking)
Extra Credit
- Term Sheet: Main Street New Loan Facility from the Federal Reserve
- Term Sheet: Main Street Expanded Loan Facility from the Federal Reserve
- Treasury press release about the Main Street Lending Facility
Places to Get Unofficial Information
- Wall Street Journal article “The Fed’s Main Street Lending Program: Who’s Eligible?”
- Ropes & Grey summary information about the Main Street Lending Facility