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The Coronavirus Aid, Relief and Economic Security (CARES) Act was a multitrillion-dollar stimulus bill signed into law in March 2020. One of the programs established by the Federal Reserve under this act was the Main Street Lending Program. The MSLP provided up to $600 million of novel or expanded loan facilities for small- to medium-sized businesses impacted by lockdowns resulting from the COVID-19 pandemic. Beneficiaries of the MSLP must have been in good financial health prior to the coronavirus pandemic. The main caveat was that employers who took on the loan made reasonable efforts to retain employees and maintain payroll. The program officially ended in January 2021. What Was the Main Street Lending Program? The MSLP was one of the government's solutions to help businesses cope with the fallout from closures resulting from the COVID-19 pandemic. Eligible employers were offered affordable loans with five-year repayment terms, with interest capped at the LIBOR rate plus 3%. Interest payments for business operators were deferred by a year, with principal payments deferred for two. The borrower was expected to repay 15% by the end of the third and fourth years, with the remaining 70% due in the fifth year. There were five facilities, which we'll discuss below. Main Street New Loan Facility Under the MSNLF, the Federal Reserve bought unsecured loans that originated on or following April 24, 2020. The original minimum loan amount was $250,000, but this was reduced to $100,000 by the Federal Reserve in October 2020. The maximum loan was the lower amount between $35 million and an amount that doesn't exceed four times the company's 2019 EBITDA plus its existing debts. Main Street Priority Loan Facility The start date for MSPLFs was also April 24, 2020, and the minimum loan value was $100,000. The maximum amount borrowers could access was the smaller amount between six times the company's 2019 EBITDA plus existing debts and $50 million. Main Street Expanded Loan Facility The MSELF was created for loans that originated prior to April 24, 2020. The minimum amount for this type of loan was $10 million, while the maximum amount was the lower amount between six times the company's 2019 EBITDA plus available and outstanding debt and $300 million. Nonprofit Organization New Loan Facility The NONLF was for new loans made on or after June 15, 2020, to nonprofits operating out of the United States. The original minimum amount was $250,000, but this was reduced to $100,000 in October 2020. The maximum loan was the smaller amount between $35 million and the organization's average quarterly revenue in 2019. Nonprofit Organization Expanded Loan Facility For companies, there were three options for five-year term loans with an adjustable rate of LIBOR between one and three months and 300 basis points. For eligible borrowers, principal payments were deferred for two years, while interest payments were deferred for a single year. All loans that fall under the MSLP umbrella should permit prepayment without penalizing borrowers. While financing is provided by private lenders, the Federal Reserve backs them all. MSNLF MSNLF MSNLF Term Five years Five years Five years Minimum Term Loan SIze $100,00 $100,00 $10,000,000 Maximum Loan Size Lesser amount between $35 million and four times adjusted EBITDA in 2019 Lesser amount between $35 million and six times adjusted EBITDA in 2019 Lesser amount between $300 million and six times adjusted EBITDA in 2019 Lender Risk Retention 5% 5% 5% Payment Terms 15% third year, 15% fourth year and 70% in the fifth year 15% third year, 15% fourth year and 70% in the fifth year 15% third year, 15% fourth year and 70% in the fifth year Rate LIBOR plus three percent LIBOR plus three percent LIBOR plus three percent Lender Transaction Fee 100 basis points of principal loan amount at the time of origination 100 basis points of principal loan amount at the time of origination 100 basis points of principal loan amount at the time of origination Borrower Origination Fee 100 basis points of principal loan amount at the time of origination 100 basis points of principal loan amount at the time of origination 100 basis points of principal loan amount at the time of origination Fees, Rates and Terms To help businesses impacted financially by the COVID-19 pandemic, the Federal Reserve guaranteed affordable loans with affordable fees and terms to eligible borrowers. What's more, lenders weren't permitted to charge borrowers extra if they paid off the loan before the term was up. Let's look at the fees, rates and terms that were in place for the Main Street Lending Program. Fees Transaction fees: Lenders paid the Federal Reserve a transaction fee of 1% of the principal amount, and this savings was passed on to borrowers. Origination fees: Companies eligible for the MSLP paid the lender an origination fee of no more than 1% of the principal amount of the loan. Servicing fees: The Federal Reserve paid the lender an annual servicing fee amounting to 0.25% of the total amount of loan participation. Interest Rates and Repayment Terms Loans reached maturity at five years, and the applicable interest rate was equivalent to LIBOR plus 300 basis points. Principal payments were deferred for two years for all facilities, while interest payments were deferred for one year. Unpaid interest was capitalized. When it comes to repayment, 15% of the principal loan amount was due at the end of the third and fourth years. A balloon payment of 70% was due when maturity was reached in the fifth and final year. Main Street Loan Program and the Paycheck Protection Program The PPP scheme, an SBA-backed loan to help employers pay their workforce during the coronavirus pandemic, ended on May 31, 2021. Businesses were eligible to apply for both loans, with banks permitting borrowers to waive up to $2 million in PPP loans under specific circumstances. Companies accepting loans were expected to follow restrictions relating to stock buybacks, compensation and dividend payments applicable to loan programs established under the CARES Act. The MSLP's aim was to ensure companies remained operational and maintained payroll. The Federal Reserve waived the 1% fee it collected from lenders for loans under $250,000 and allowed banks to double fees to 2% to facilitate smaller loans for borrowers. How to Qualify for the Main Street Lending Program Let's take a look at the eligibility criteria that were required for businesses and nonprofits to take part in the various MSLP facilities: MSNLF The business must have: Been established prior to March 13, 2020 Operated primarily in the United States 15,000 employees or fewer or annual revenue less than $5 billion in 2019 The business could not: Participate in MSELF, MSPLF or the Primary Market Corporate Credit Facility Have received specific support from the Coronavirus Economic Stabilization Act of 2020 MSPLF The business must have: Been established prior to March 13, 2020 Operate primarily in the United States 15,000 employees or fewer or annual revenue less than $5 billion in 2019 The business could not: Participate in MSELF, MSPLF or the Primary Market Corporate Credit Facility Have received specific support from the Coronavirus Economic Stabilization Act of 2020 MSELF The business must have: Been established prior to March 13, 2020 Operate primarily in the United States 15,000 employees or fewer or annual revenue less than $5 billion in 2019 The business could not: Participate in MSELF, MSPLF or the Primary Market Corporate Credit Facility Have received specific support from the Coronavirus Economic Stabilization Act of 2020 NONLF The nonprofit must have: Been continually operating since January 1, 2015 15,000 employees or fewer or annual revenue less than $5 billion in 2019 More than 10 employees Endowment below $3 billion Non-donation revenue equivalent to or more than 60% of expenses for 2017 through 2019 NOELF The nonprofit must have: Been continually operating since January 1, 2015 15,000 employees or fewer or annual revenue less than $5 billion in 2019 More than 10 employees Endowment below $3 billion Non-donation revenue equivalent to or more than 60% of expenses for 2017 through 2019 How to Apply Businesses eligible for the Main Street Loan Program submitted their application to an eligible lender. Different lenders had different requirements with regard to documentation, but it was crucial that borrowers worked with participating loan providers. Banks, credit unions and savings associations were the primary lenders for this type of financing, which alternative lenders were not eligible to provide. Get Help Navigating Business Funding Options If your business is struggling as a result of the coronavirus pandemic, Lendzi could help you find a suitable loan. Get in touch today to find out more. Ready to get started? How much money do you need? $1 - $5K $5K - $25K $25K - $50K $50K - $100K $100K - $250K $250K - $500K $500K - $1M Over $1M Get Funding Now Get funding now

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