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On Monday, June 8, 2020, the Federal Reserve expanded the Main Street Lending Program (MSLP), making it more accessible to small and medium-sized businesses. This second round of modifications to the program offers a wider range of loan amounts with more flexible payment terms. These changes came as a result of feedback from companies on the original $600 billion program, which is part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, and the initial changes announced on May 27, 2020. The original Main Street loan terms deterred many small businesses from potentially taking advantage of the program, creating a need for modifications.
The intent of the Main Street program is to provide loans to U.S. companies with 15,000 or fewer employees and less than $5 billion in 2019 revenue that were in good financial standing before the COVID-19 crisis. The launch of the program has been delayed for months, but it is anticipated to open for lender registration this week. It is important to note that companies who have accepted Paycheck Protection Program (PPP) loans are eligible to also take advantage of the Main Street program. However, unlike PPP loans, Main Street loans are not forgivable.
Changes to the Main Street Lending Program include:
- Lowering the minimum loan amount to $250,000 (down from $500,000).
- Increasing the maximum loan amount to $300 million (up from $200 million).
- Increasing the term of each loan option to five years (up from four years).
- Extending the repayment period for all loans by delaying principal payments for two years (up from one year), with interest payments deferred for one year (set at LIBOR +3%).
- Raising the Reserve Bank’s participation to 95% for all loans (previously, the Reserve Bank purchased 85% of priority and expanded loans in the program).
How can Moore Colson help?
This is a challenging time, and understanding your options can give you peace of mind that your organization is prepared and that you can act accordingly when the need arises. Moore Colson can help you understand your cash flow needs by developing a multi-week cash flow projection, which will assist in identifying any operating cash flow shortfalls. After helping you understand your business’s cash flow needs, we can help you navigate the options available to cover any projected shortfalls, including applying for a Main Street loan.
To learn more, visit the COVID-19 Business Services section of our website or contact us. Also, be sure to subscribe here to get our news and alerts as they are released as we are committed to keeping you updated on how to navigate financial challenges associated with the COVID-19 pandemic.
Tyler Wright, CPA/ABV/CFF, CFE, is a Director in the firm’s Consulting Practice. Drawing on 15 years of experience as an external auditor, internal auditor, and forensic accountant, Tyler provides accounting and financial advice in forensic investigations and commercial disputes.
Chris Tierney, CTP, CFE, is a Partner and the Group Leader for Moore Colson’s Consulting Practice. Chris has over 32 years of experience in providing financial, operational and strategic management, analysis, and advice to domestic and international companies and their stakeholders.