Recalculating…Route Guidance Changes for MSLP and Supports More Businesses

Published June 10, 2020.  For more information, contact Joseph Heim at jheim@dopkins.com.

On Monday, June 8th, the Federal Reserve Board expanded its Main Street Lending Program to broaden the parameters for small and medium-sized businesses to be able to receive the support from the program. As outlined on the Federal Reserve website, the $600 billion program received multiple updates to serve additional businesses.   Changes to the terms include a lower minimum loan amount, a higher maximum loan limit, an adjusted principal repayment schedule, and an extension of the term to five years. These changes provide borrowers with greater flexibility in repaying the loans. According to the Federal Reserve, the Board expects the Main Street Lending Program to be open soon where businesses will apply for the loan through a bank.

The changes to the Main Street Lending Program include:

  • Lowering the minimum loan size for certain loans to $250,000, originally at $500,000.
  • Increasing the maximum loan size for all facilities. This makes the maximum loan size for a new loan from $25 million to $35 million. Loan sizes can be up to $50 million for priority loans, which had previously been capped at $25 million.
  • Increasing the term of each of the loan options from four years to five years.
  • Extending the repayment period for all loan options by delaying principal payments for two years, which was only delayed for one year.
  • Raising the Reserve Bank’s participation to 95% for all loans.

The chart below lays out the changes for the loans and displays additional details.

 

 

Main Street Lending Program Loan Options
New Loans
Priority Loans
Expanded Loans
Term
5 years
(previously 4 years)
Minimum Loan Size
$250,000
(previously $500,000)
$10M
Maximum Loan Size
The lesser of $35M, or an amount that, when added to outstanding and undrawn available debt, does not exceed 4.0x adjusted EBITDA
(previously $25M)
The lesser of $50M, or an amount that, when added to outstanding or undrawn available debt, does not exceed 6.0x adjusted EBITDA
(previously $25M)
The lesser of $300M, or an amount that, when added to outstanding or undrawn available debt, does not exceed 6.0x adjusted EBITDA
(previously $200M)
Risk Retention
5%
5%
(previously 15%)
5%
Principal Repayment
Principal deferred for two years, years 3-5: 15%, 15%, 70%
(previously principal deferred for one year and 33.33% repayment due in years 2-4)
Principal deferred for two years, years 3-5: 15%, 15%, 70%
(previously principal deferred for one year and 15%, 15%, 70% repayment due in years 2, 3, and 4, respectively)
Interest Payments
Deferred for one year
Rate
LIBOR + 3%

 

As these financing solutions evolve and change frequently, please refer to our website for the most current information.

The Dopkins Transaction Advisory Specialists and our Financial Advisory Service Team is here to assist you in accessing liquidity and how to respond to changed business circumstances in light of COVID-19 while navigating the terms and conditions of the emergency loan programs identified above.   Our team focuses on helping business owners and companies identify and secure short-term and long-term capital.  Whether it’s domestic or foreign A/R, inventory, purchase order, construction, mezzanine financing, term loans and equity, our team has multiple sources of financing that will provide solutions to our clients.

For a printable copy of this article, please click here.

For more information, contact Joseph Heim at jheim@dopkins.com.

About the Author

Joseph A. Heim CFE, CPA

Joseph Heim has over 25 years' experience investigating matters involving white-collar crime, fraud and corruption. He provides forensic accounting, litigation support and expert witness services to businesses, attorneys and commercial finance lenders. He is the Partner in charge of Dopkins Asset Based Lending Consulting Services.

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