April 9, the Federal Reserve introduced the Main Street Lending Program that
will permit small and medium-sized businesses to obtain bridge financing
through eligible lenders. This is the latest in a series of relief programs to
address the economic challenges of the COVID-19 pandemic, and businesses that
have applied and/or qualified for the Paycheck Protection Program may also take
out a loan under this program. There are restrictions on the use of the loan
proceeds, and the borrower must make required attestations. Based on
initial information from the Federal Reserve, this program offers loans under
the following criteria:
- Minimum loan amount is $1 million and is available under two lending options:
- Initiate a new loan after April 8, 2020, with a maximum loan amount equal to the lesser of $25 million or an amount that, when added to the borrower’s existing outstanding and available debt, does not exceed four times 2019 earnings before interest, taxes, depreciation, and amortization (EBITDA);
- Increase an existing outstanding loan issued prior to April 8, 2020. The maximum loan size under this second facility is based on the lesser of three amounts: a) $150 million, b) 30% of existing outstanding and available debt; or c) an amount that, when added to the borrower’s existing outstanding and available debt, does not exceed six times 2019 EBITDA.
- Four year loan maturity.
- Principal and interest payments deferred for one year.
- No prepayment penalty.