The total dollars available under the Main Street program will be much greater than the amount invested by Treasury. At the time of this publication, the MSLP isn’t live. Main Street Lending Program: Requirements & Documentation. Because the Main Street Lending Program targets businesses that need loans of at least $100,000, many small businesses may be left hung out to dry with this program. Special thanks to Devon Asmussen for his contributions to this article. Investment advisory services offered through Moss Adams Wealth Advisors LLC. No Buybacks of Publicly Traded Equity. If you have any questions about the MSLP and future actions your organization may need to take in regard to securing a loan, please contact your Moss Adams professional. These efforts include undertaking good-faith efforts to maintain payroll and retain employees in light of its capacities, the economic environment, available resources, and the business need for labor. We've created the BDO Library as a "go to" source for informative and thought provoking knowledge resources. When it comes to business, innovation is changing everything. What Is the maximum amount of money we can borrow? This memorandum is provided by Skadden, Arps, Slate, Meagher & Flom LLP and its affiliates for educational and informational purposes only and is not intended and should not be construed as legal advice. All of the loans provided under this program will be full recourse and won’t be forgivable. The eligible borrower must also certify that: Below is an overview of the MSLP including types of loans available and their individual terms. No Dividends or Capital Distributions on Common Stock. The Federal Reserve is not providing form loan documents for eligible lenders to use when making eligible loans to eligible borrowers. To date, the SPV is authorized to purchase loan participations until September 30, 2020. The eligible borrower must commit to the following terms: However, an S corporation—or other pass-through tax entity—that’s an eligible borrower may make distributions to the extent reasonably required to cover its owners’ tax obligations in respect of the entity’s earnings. 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It’s a one-way street, providing free tools and resources to help businesses survive the crisis. The Program loan participation agreement, form borrower and lender certifications, and other required form agreements for all five facilities can be found on the Federal Reserve Bank of Boston’s Main Street Lending Program Forms and Agreements website. June 2020 . The following businesses aren’t generally eligible for the MSLP: A business can only participate in one of the Main Street lending facilities and can’t participate in the Primary Market Corporate Credit Facility (PMCCF). ... General Eligibility Requirements for Priority Loans. 4 See Federal Reserve, Main Street Lending Program Frequently Asked Questions (FAQs) (as of June 8, 2020) at I.2. The Federal Reserve expanded the Main Street Lending Program (MSLP) on April 30, 2020. 6 This is a change from the original Main Street term sheets, which did not require aggregation. Collecting these documents now will help you save time so you can get your funds faster. Businesses with up to 15,000 employees or less than $5 billion in 2019 annual revenue can apply for the MSLP, which has a five-year maturity term. Southwest Assurance Regional Managing Partner, Atlantic Assurance Regional Managing Partner, Southeast Assurance Regional Managing Partner, Assurance Northeast Regional Managing Partner, Subscribe to receive the latest BDO News and Insights, Main Street Lending Program: Requirements & Documentation, Business Restructuring & Turnaround Services, International Financial Reporting Standards, Financial Institutions & Specialty Finance, BDO Center for Corporate Governance and Financial Reporting, Do Not Sell My Personal Information – For CA Residents as to BDO Investigative Due Diligence. The tax function is transforming. An officer or employee of the borrower whose total compensation exceeded $3 million in calendar year 2019 may not receive total compensation from the borrower during any 12-consecutive-month period in excess of the sum of $3 million plus 50% of the total compensation over $3 million the individual received in calendar year 2019. 12 See FAQ G.8. Brian D. Christiansen Unlike the Paycheck Protection Program (PPP) or the Economic Injury Disaster Relief Program (EIDL)—which are both overseen by the Small Business Administration (SBA) and tailored for small businesses—the MSLP was established by the Federal Reserve Board as a lending option for larger companies. Such control can exist under the SBA affiliation rules under various circumstances based on ownership (including at levels below 50% of voting stock), common management, governance rights (e.g., veto rights over major decisions of board of directors), or other relationships. All rights reserved. Citrin Cooperman is an independent member firm of Moore North America, which is itself a regional member of Moore Global Network Limited (MGNL). Assurance, tax, and consulting offered through Moss Adams LLP. Depending on the program loan, 75-100 basis points. Cutback for Employees Above $3 Million. Is collateral required for Main Street Loans? The Federal Reserve made clear that participation in the SBA PPP does not prohibit a borrower from also participating in the Main Street program. Use the main street lending program calculator to estimate loan amount. You can borrow up to 4x EBITDA for New loan, up to 6x EBITDA for Priority Loan, or up to 6x EBITDA or 35% of existing but undrawn bank debt for Existing loan. Should we extend our current loan or apply for a new loan. The document must be signed by an authorized officer of the eligible lender. Additional loan terms differ based on the issuing credit facility and are as follows: MSLP loans are distributed through a network of eligible lenders and lending facilities, including U.S. insured depository institutions (including banks, credit unions, and other financial institutions), U.S. bank holding companies, U.S. branches or agencies of a foreign bank, and U.S. savings and loan holding companies. The Federal Reserve acknowledges the unique needs of these organizations and will be evaluating the feasibility of adjusting the borrower eligibility criteria and loan eligibility metrics. Those eligibility criteria are summarized in the section below on eligible borrowers. An eligible borrower may participate in only one of the Main Street facilities and may not also participate in the Federal Reserve’s Primary Market Corporate Credit Facility (PMCCF). Both of these size tests require aggregation of the borrowing entity with its affiliates. New loans (MSNLF), priority loans (MSPLF), and expanded loans (MSELF) can be either secured or unsecured. Borrowers should use the average of the total number of persons employed by the borrower and its affiliates over the 12-months prior to the MSLP loan origination. Some of the questions you may want to discuss are: Step 2: Contact your financial advisors and ask them to gather all loan documentation now so you can save time later. In its revised term sheets and guidance, the Federal Reserve clarified that this prohibition will not apply to distributions made by an S corporation or other tax pass-through entity to the extent reasonably required to cover its owners' tax obligations in respect of the entity's earnings. ", The Federal Reserve indicated that participants will be required to certify that “as of the date [of the certification,] the [b]orrower[] is unable to secure adequate credit accommodations from other banking institutions, consistent with 12 CFR 201.4(d)(8).” The Federal Reserve indicated that this certification “does not necessarily mean that no other credit is available for the [b]orrower’s purpose. There is no requirement that eligible lenders participate or offer Main Street loans to their customers. A Main Street borrower may not repurchase equity securities of itself or its parent that were listed on a national exchange while the loan was outstanding, except as otherwise required pursuant to a contract in effect on March 27, 2020. An eligible borrower must not have received specific support under Title IV of the CARES Act, which generally refers to those stimulus programs providing grants and direct loans to specific industries (e.g., air carriers and related businesses, air cargo and national security). Return to this site to continue to monitor updates for this program and check the. Boards’ High Stakes Balancing Act: Navigating Through Crisis.