On Friday March 27, 2020, the President signed into law, the Coronavirus Aid, Relief, and Economic Security Act (H.R. 748) or “CARES Act,” providing, among other things, authority to the Board of Governors of the Federal Reserve System (Federal Reserve) to establish a Main Street Lending Program that supports lending to small and mid-sized businesses on such terms and conditions as the Federal Reserve may set consistent with section 13(3) of the Federal Reserve Act (12 U.S.C. 343(3)) (MSLP).
On April 9, 2020, as supplemented on April 17, 2020, the Federal Reserve announced that it is establishing a MSLP to support lending to small and medium-sized businesses that were in good financial standing before the onset of the COVID-19 pandemic. The MSLP will operate through two facilities: the Main Street New Loan Facility (MSNLF) and the Main Street Expanded Loan Facility (MSELF). Term sheets for each facility providing more information regarding eligibility and conditions are available by clicking on the links below.
Main Street New Loan Facility Term Sheet
Main Street Expanded Loan Facility Term Sheet
To implement the MSLP, a Federal Reserve Bank will set up a special purpose vehicle (SPV) to purchase 95 percent participations in loans originated by eligible lenders. Lenders will retain 5 percent of the loans. As detailed further in the term sheets, U.S. businesses are eligible for loans if they meet either of the following conditions: (1) the business has 10,000 employees or fewer; or (2) the business had 2019 revenues of $2.5 billion or less. Loans would have a four-year maturity, and principal and interest payments on the loans will be deferred for one year. Eligible lenders may originate new loans (under MSNLF) or increase the size of (or "upsize") existing loans (under MSELF) made to eligible businesses.
The Federal Reserve is currently working to create the MSLP infrastructure and is considering the feedback provided by the public. More information will be posted at the below website as it becomes available regarding program terms and how eligible lenders can sell eligible loan participations to the SPV. Once the MSLP is operational, small and medium-sized businesses interested in the MSLP should seek to apply for MSNLF or MSELF loans from an eligible lender.
https://www.federalreserve.gov/monetarypolicy/mainstreetlending.htm
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