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Main Street Lending Program

By Alex Kosyla, Esq.

April 20, 2020

While the CARES Act may provide business owners with some relief, the uncertainties that have persisted throughout the rollout of the Paycheck Protection Program (“PPP”) may still remain with any new legislation. Business owners should be aware of all options available to them, one of which being the new Main Street Lending Program. The Main Street Lending Program is targeted at midsized companies with between 500 and 10,000 employees that do between $10 million to $2 billion in revenue.

The Main Street Lending Program operates similar to a traditional loan with significantly low interest rates, but unlike PPP loans, will not be forgiven. The Main Street Lending Program is now open to businesses with as many as 10,000 employees and offers aggregate loans up to $600 billion directly through lenders. Businesses who did receive funding through the PPP may also apply for a loan through the Main Street Lending Program. All businesses interested in this program may apply directly through their business lender.

Main Street Lending Program Loans:

  • Eligible borrowers must have at least $250,000 in earnings before interest, taxes, depreciation, and amortization and no debt;

  • Variable interest rates from 2.5% to 4%;

  • Four-year loan maturity;

  • One-year deferment on repayment of the principal amount and interest;

  • Minimum loan of $1 million;

  • Maximum loan size that is the lesser of (i) $25 million or (ii) an amount that, when added to the borrower’s existing outstanding and committed but undrawn debt, does not exceed four times the borrower’s 2019 earnings before interest, taxes, depreciation, and amortization (“EBITDA”);

  • Eligible lenders may originate new loans or increase the size of existing loans under the Main Street Lending Program made to eligible businesses;

  • No minimum company size requirement. sole proprietors, self-employed business owners, and companies with fewer than 500 employees may apply;

  • No penalty for prepayment; and

  • These are loans that will not be forgiven.

Main Street Lending Program Eligibility

  • Businesses created or organized in the United States or under the laws of the United States with significant operations in and a majority of its employees based in the United States;

  • With 10,000 or fewer employees; and

  • That had 2019 revenue of $2.5 billion or less.

Main Street Lending Program Requirements and Attestations:

  • Proceeds of the loan will not be used to repay, or refinance pre-existing loans or lines of credit made by the lender to the borrower;

  • Proceeds of the loan must not be used to repay other loan balances or debt of equal or lower priority, with the exception of mandatory principal payments, unless the borrower has first repaid the Main Street Lending Program loan in full;

  • Borrower must not seek to cancel or reduce any of its outstanding lines of credit with the any lender;

  • Financing is required due to the exigent circumstances presented by the COVID-19 pandemic, and that, using the proceeds of the loan will make reasonable efforts to maintain its payroll and retain its employees during the term of the loan;

  • Borrower must attest that it meets the EBITDA leverage condition stated above;

  • Borrower must attest that it will follow compensation, stock repurchase, and capital distribution restrictions that apply to direct loan programs under section 4003(c)(3)(A)(ii) of the CARES Act; and

  • Lenders and borrowers will each be required to certify that the entity is eligible to participate in the Main Street Lending Facility, including in light of the conflicts of interest prohibition in section 4019(b) of the CARES Act.

At RKF Global PLLC, we are here to help our business clients find the best approach to financing that best suits their business needs, and we are here to answer any questions. For more information, contact Alex Kosyla at (312)888-2000 or alex.kosyla@rkfglobal.com.

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