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Understanding Eligibility for $600bn Main Street Lending Program

by Danielle Kane | Apr 15, 2020 10:16:48 AM

Updated April 15th, 2020 10:15 am

As part of
the ongoing effort to help fund businesses hurt by the COVID-19 crisis, the
Federal Reserve Board announced several initiatives on April 9 to get mid-sized
businesses access to funding. One of these initiatives is the Main Street
Lending Program.

The
application process for this program is not open yet, as of April 13. Legal
experts expect the process will open during the week of April 20. Before this
happens, it’s important for business owners to understand what this all means.

In short, the
Main Street Lending Program sets up an additional $600 billion for banks and
lenders to loan to mid-sized businesses. Where did this money come from? If you
recall, from the Stimulus Bill (aka the CARES Act, enacted on March 27), $454
billion was set aside for mid-large sized businesses. To be clear, this is
separate from the roughly $350 billion appropriated for small businesses. Of
that $454 billion, the Department of Treasury announced it will invest $75
billion and through leverage, that will result in $600 billion. If you want
details on exactly how that investment formula works, you can read up on it
here.

At Better
Business Bureau Northwest and Pacific, we think it is critical small and
mid-sized business owners understand what their options are and who is eligible
for what. While the Main Street Lending Program is not aimed at small
businesses, it doesn’t require a business to employ a minimum number of employees.

Here’s the
breakdown of eligibility:

Eligible
borrowers include any business organization (profit or non-profit) with either
a maximum number of employees of 10,000 or a maximum amount of $2.5 billion in
annual revenue. The following conditions must be met:

  • The
    business must be created in the U.S., with majority of employees in the U.S.
  • The
    business was in good financial standing before the crisis.
  • The
    business has not otherwise received adequate economic relief in the form of
    loans under the CARES Act (specifically, Economic Injury Disaster Loans).
  • Recipients
    must have incurred, or will incur, “covered losses,” as a result of COVID-19, including
    reduced demand, unbudgeted medical expense and unavailability of credit.

Important to
note is that businesses are still eligible even if they have already
received funding through the Small Business Administration’s Paycheck
Protection Program.

Another
important caveat is that these loans will not be forgivable.

If we look
further at the details of the $600 billion set aside, we see that the Main
Street Lending Program is broken down into two facilities: the Main Street New
Loan Facility (MSNLF) and the Main Street Expanded Loan Facility (MSELF).

Under the
MSNLF, loans are available up to $25 million. Under the MSELF, loans are
available up to $150 million. You cannot participate in both. Get more information on loan terms,
including interest rates and service fees here.

Finally, as
expected, there are some loan restrictions, including but not limited to:

  • The
    loan is needed due to the circumstances presented by COVID-19 and that by using
    the loan, businesses will make a reasonable effort to maintain its
    payroll and retain employees for the term of the loan.
  • The
    loan will be used to retain at least 90% of the recipient’s workforce at full
    compensation and benefits through Sept. 30.
  • The
    loan will be used to restore not less than 90% of the businesses’ workforce
    that existed before February 1, 2020, and will restore that workforce within
    four months after the current public health emergency is terminated.

Your Better
Business Bureau is working hard to understand and inform you of legislation
changes and funding options for micro-, small- and mid-sized business. We will
continue to update this information and more on: https://bbb-businesses.org/covid-19/   

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