Fed Expands Scope of ‘Main Street’ Program with ABA-Urged Changes

The Federal Reserve today expanded the scope of its Main Street Lending Program to accommodate more businesses and more loan options for participating banks. The revised term sheets for the program include several changes recommended by the American Bankers Association, including permitting the use of the London Interbank Offered Rate, lowering the minimum loan size somewhat and providing flexibility on the maximum loan size.

Eligible MSLP loans will be originated after April 24 and have a four-year term with a minimum loan size of $500,000 in the Main Street New Loan Facility and Main Street Priority Loan Facility. The minimum size will be $10 million in the Main Street Expanded Loan Facility. In the MSNLF and the MSELF, lenders will retain 5% of the risk on each loan, while retaining 15% in the newly created MSPLF.

ABA President and CEO Rob Nichols welcomed the changes, reiterated banks’ commitment to make the MSLP a success and urged the Fed to consider additional adjustments, “including further lowering the minimum loan size, increasing flexibility in loan terms and offering additional reference rate options. Doing so would increase bank participation and allow this program to reach even more small and midsize businesses in need.”

As ABA advocated, the Fed will provide a more flexible calculation method for maximum loan sizes. In the MSNLF, the maximum loan size will be $25 million or four times adjusted 2019 EBITDA, whichever is less; in the MSPLF, it will be the lesser of $25 million or six times adjusted EBITDA. In the MSELF for larger loans, the maximum loan will be $200 million, 35% of outstanding and undrawn available debt or six times adjusted EBITDA, whichever is less. Instead of referencing loans to the Secured Overnight Financing Rate, lenders in all facilities will use Libor plus 300 basis points.