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Federal Reserve Creates Small and Mid-sized Company Loan Facilities Under the CARES Act

Joseph Most, J.D.

4.14.20 | Client Alert – COVID-19 Update

Title IV of the CARES Act enabled the Federal Reserve to create the Main Street Lending Program (“MSLP”) to support small to mid-size businesses. On April 9, the Federal Reserve released term sheets for the Main Street Expanded Loan Facility (“MSELF”) and Main Street New Loan Facility (“MSNLF”, collectively the “MSLP”) which provide a first look at how this lending program will work. The MSLP may provide up to $600 billion of liquidity to eligible businesses by purchasing 95% participations in loans originated by eligible lenders.


Companies eligible to borrow are businesses with up to 10,000 employees or up to $2.5 billion in 2019 revenue. The business must be created or organized in the U.S. with significant operations and a majority of their employees here. A company may borrow under either the MSELF or MSNLF but not both.

Loan Details

All MSLP loans have a 4-year term, with 1-year deferral of interest and principal payments, and an interest rate equal to 2.5% to 4% above the Secured Overnight Financing Rate (currently 0.01%). Loans can be prepaid at any time without penalty and the minimum borrowing is $1,000,000. Under the MSNLF, the maximum loan amount is $25,000,000. Borrowers enter this program if they did not have already have a loan from an eligible lender as of April 8th. Eligible lenders are U.S. insured depository institutions, U.S. bank holdings companies and U.S. savings and loan holding companies. If an eligible borrower already had an outstanding loan with one of these lenders, then they enter the MSELF which allows the upsizing of existing loans to a maximum of $150,000,000. Maximum loan amounts under both programs have further limitations based on a specified multiple of the borrower’s 2019 EBITDA, and in the case of the MSELF, a percentage of its existing borrowing. Loans under the MSLNF are unsecured while those under MSELF may require collateral.

Borrowers and lenders are required to make certain specified attestations, including that borrowers will use reasonable efforts to maintain its payroll and retain its employees, as well as limitations on compensation, equity repurchase, and distributions on equity, during the term of the loan. Additionally, borrowers must pay a 1% loan origination fee and potentially a 1% fee on the 95% of the loan that the Federal Reserve participates in.


The full-term sheets for both programs are available here: Main Street New Loan Facility and Main Street Expanded Loan Facility. The program is not yet finalized, and the Federal Reserve and Treasury are seeking input from potential lenders, borrowers, and other interested parties to ensure it is effective while protecting the taxpayers’ pocketbooks. As always, please reach out to your Berdon advisor to discuss how a loan under the Main Street Lending Program may benefit your business.

For more information on this topic or any other matter related to the COVID-19 pandemic, please contact your Berdon Advisor.

Berdon LLP New York Accountants