Main Street? |

So, we all know about the SBA programs that have been developed (check my index for PPP and EIDL, if you don’t know about those programs) to support those small (and some very NOT small) businesses that have been adversely affected by the pandemic.

But, most of us are totally unfamiliar with the programs the Federal Reserve have established. The program (which is actually under the auspices of the Federal Reserve Bank of Boston), the Main Street Lending Program (MSLP), has been developed to support both small and medium-sized businesses – specifically those that were in sound financial condition before COVID-19 quarantines. The $ 600 billion MSLP has three subsets- the Main Street New Loan Facility (MSNLF), the Main Street Priority Loan Facility (MSPLF), and the Main Street Expanded Loan Facility (MSELF). (It has not yet been decided if the Federal Reserve will establish two more subsets to help the adversely affected non-profits; those elements would be the Nonprofit Organization New Loan Facility (NONLF) and the Nonprofit Organization Expanded Loan Facility (NOELF).

Since this is a Federal Reserve program, it means the MSLP operates via eligible lenders- and not directly via the Fed. And, eligible businesses are limited to those with 15K employees or less OR 2019 turnover of $ 5 billion or less. (As you can see, very few companies are actually excluded from this program, as opposed to the PPP loan, for example.) These loans, as opposed to the EIDL with their 30 y maturity, come due in 5 years (which up from the first announced maturity of four years), have principal repayments deferred for the first two years of the loan and the first year’s interest payment also in a deferred state. Once the loan is approved, the interest rate is based upon LIBOR, but with a 300 basis point increase.

The loans will range in size from $ ¼ million (the minimum has been reduced twice- from $ 1KK to $ 500K and now to this level) up to $ 35 million. However, the loan can NEVER exceed 4X the annual turnover (actually EBIDTA- earnings before interest payments, depreciation, taxes, and amortization) of the firm. So, that means if our annual profits are at least $ 62,500, the loan could prove very useful to us.

All the loans go through eligible lenders (typically our commercial bankers, credit unions, and savings and loans), which retain 5% of the loan liability, with the other 95% remaining with the Federal Reserve

And, therein lies the problem. Just like with the PPP, many banks have nary a clue about the program- or are not interested in participating. And, this program was first announced when Spring began (OK, 2 days later on 23 March), but given the unprecedented scope and reach of this program, things have gone anything but smoothly. This week was the first time that the Fed said banks could register to participate in MSLP.

There is also a push (from community-based lenders) for the Feds to lower the minimum loan size down to $ 100,000 (which means those of us earning $25K in profits EBIDTA could qualify). And, of course, this is a Federal Reserve program, so the paperwork demands are more than substantial. (Not to mention the Fed fears it could take a bath on a bunch of these loans. Even more than the Treasury set aside of $ 75 billion to cover losses.)

And, since the Fed has not published a list of participating banks, it’s up to us to find (or cajole) a bank to participate in the MSLP.

But, if you qualify, it’s time to start seeking that partner bank.

Here’s a list of some banks that ARE participating:

United Bank. This is a DC regional bank (which is one of our three banks).

Wells Fargo & Co. While, like the other two banks listed here, WF has participated in the PPP program, you should know that there is an ongoing investigation into its lending practices.

BankofAmerica. Not only is it participating in this program, BofA was the second most active PPP lender ($25.1 billion in loans).