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Federal Reserve Updates Main Street Lending Program Terms

Kristen Brown, CPA, HoganTaylor Assurance Senior Manager

On October 30, 2020, the Federal Reserve Board released updates to the Main Street Lending Program. As the pandemic continues to impact the revenues of many small businesses, the revisions are an attempt to provide smaller businesses and nonprofit organizations with access to the lending facilities.

The most significant revisions include:

  • A reduction in the minimum loan size from $250,000 to $100,000 for the Main Street New Loan Facility, Main Street Priority Loan Facility, and Nonprofit Organization New Loan Facility. As of October 31, 2020, the Main Street Portal is accepting applications for the specified loans with a principal amount of $100,000 to $250,000.
  • For loans originated with an original principal balance of less than $250,000, there will be no transaction fee; however, the eligible lender may charge an origination fee of up to 200 basis points of the principal amount.
  • While eligible borrowers are permitted to receive more than one loan from a single Main Street facility, the Main Street special purpose vehicle will not accept more than one loan made to a single borrower by the same lender with an initial principal amount of less than $250,000 within 60 days.
  • Exclusion of Payment Protection Program (PPP) loan funds from the organization’s “existing outstanding and undrawn available debt” calculation for borrowers who, together with their affiliates, received PPP loans with original principal balances of $2 million or less under the following circumstances:
    • The “Forgiveness Amount” reported on the borrower’s application for PPP loan forgiveness may be excluded from the calculation. However, PPP loan funds must be included in the calculation to the extent the PPP lender or SBA determined a portion of the PPP loan is ineligible for forgiveness.
    • The PPP loan may be excluded from the calculation when the borrower has not yet applied for PPP loan forgiveness and the principal executive officer has a reasonable, good-faith basis to believe the loan will be forgiven in accordance with PPP requirements.

Approximately 400 loans totaling $3.7 billion have been originated to date and the Federal Reserve’s special purpose vehicle is scheduled to stop purchasing participation in Main Street loans on December 31, 2020. The press release and additional information regarding the Main Street program, including the revised FAQs and lender documents, can be found here.