On April 9, 2020, the Federal Reserve Board (FRB) announced that it would take steps to provide $2.3 trillion in loans and credit facilities to assist businesses and municipalities impacted by the economic effects of the COVID-19 public health emergency. In doing so, the FRB supports efforts sparked by the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) to provide relief to businesses and stability to the economy as the country weathers the economic effects of the COVID-19 pandemic.
The CARES Act nudged the FRB to use its discretion to establish a lending program that would provide loans to small and medium-sized businesses consistent with the FRB’s existing authority. The FRB responded by establishing the Main Street Lending Program (the MSLP), announcing that the Treasury Department will be contributing at least $75 billion in CARES Act funding toward the facilities in the program.
There are two loan facilities under the MSLP: (1) the Main Street New Loan Facility, which is designed to facilitate new lending to businesses, and (2) the Main Street Expanded Loan Facility, which is meant to enable the expansion of term loans from eligible lenders to eligible borrowers originated before April 8, 2020. In both cases, the Federal Reserve Banks, with the help of federally insured depository institutions, bank holding companies, and savings and loan holding companies acting as eligible lenders, will provide credit to small and medium-sized businesses by purchasing 95% participations in up to $600 billion in loans. Eligible lenders will retain 5% of new loans originated or the existing loans expanded under the MSLP.
The programs will be available to businesses with a maximum of 10,000 employees or with no more than $2.5 billion in 2019 annual revenue. Participating businesses must have been created or be organized in the United States or under the laws of the United States, with significant operations and a majority of its employees based in the United States. In contrast to the Paycheck Protection Program (PPP), which was established to provide relief to smaller businesses, loans under the MSLP program are not eligible for loan forgiveness.
New and expanded loans under the MSLP will have the following terms:
Under the new and expanded loan facilities, lenders must agree:
Under the new and expanded loan facilities, borrowers must:
Importantly, businesses that have taken advantage of the PPP facilitated by the Small Business Administration may also participate in the MSLP. However, MSLP borrowers may not (1) participate in both the new and expanded MSLP facilities, or (2) participate in the Primary Market Corporate Credit Facility that was also recently announced by the FRB.
The Federal Reserve’s announcement of the MSLP stated the program was still being finalized and invited comments from lenders, borrowers, and other stakeholders through April 16, 2020 at this link. Further guidance may elaborate on when an organization “requires financing” in light of the coronavirus pandemic and what constitutes “reasonable efforts” to maintain payroll and retain employees.
 Title IV, Subtitle A (Coronavirus Economic Stabilization Act of 2020), Section 4003. Note that the FRB had already announced, prior to the enactment of the CARES Act, that it planned to announce the establishment of a Main Street Business Lending Program to support lending to eligible small and medium-sized businesses, complementing efforts by the SBA.