The US Department of the Treasury only specifically calls out the limitations for compensation, stock repurchase, capital distribution restrictions, and the restrictions outlined in the CARES Act that also apply for the MSLP. This section summarizes the key criteria to be an eligible borrower under the Main Street program. For additional information on the application process, get in touch with your lender. An eligible borrower must meet at least one of the following two size tests. Everything here is free. He can be reached at (949) 221-4030 or tyler.dale@mossadams.com. A Main Street borrower may not pay dividends or make other capital distributions on common stock. Treasury's equity investment in the Main Street program will absorb any initial losses suffered by the program, which will mitigate credit risk to the Federal Reserve and help satisfy the statutory conditions for the Federal Reserve's use of emergency lending authority under Section 13(3). 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. The total dollars available under the Main Street program will be much greater than the amount invested by Treasury. Employee Count. Individual lenders will be responsible for evaluating a business’ financial condition, creditworthiness, and whether it meets the minimum conditions outlined in the Program’s term sheet. Maximum size restrictions are based off of 2019 annual revenues. 3 Section 13(3) limits the Federal Reserve's ability to take credit risk in connection with emergency lending programs. 2020 On April 9, 2020, the Federal Reserve announced additional actions it will take to provide up to $2.3 trillion in loans to support the U.S. economy. An eligible borrower must not be deemed an "ineligible business" under certain SBA regulations cited in the Federal Reserve term sheets.9 Some examples of "ineligible businesses" are financial businesses primarily engaged in the business of lending; passive businesses owned by developers and landlords that do not actively use or occupy the assets acquired or improved with the loan proceeds (except for certain eligible passive companies defined under the SBA regulations); life insurance companies; and hedge funds and private equity firms (although portfolio companies of hedge funds and private equity firms may be eligible). The lender will determine approval for a loan. Tyler Dale has worked in the capital markets since 2003. Stephanie L. Teicher Businesses eligible for the program include those with less than 15,000 employees or $5 billion in revenue in 2019. Eligible lenders in the Main Street program are U.S. federally insured depository institutions (e.g., FDIC-insured banks and thrifts and NCUA-insured credit unions), U.S. branches and agencies of foreign banks, and many U.S. nonbank affiliates of the foregoing. 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. The Federal Reserve first mentioned its intent to create a Main Street program to facilitate loans to small- and medium-sized businesses in a broader press release on March 23, 2020. A Main Street borrower must comply with the following prohibitions while the loan is outstanding and for an additional 12 months. The application of these restrictions to the Facility may be further modified at the discretion of the Federal Reserve. Those other provisions in the CARES Act contemplate a different program by Treasury, which would have conditioned borrower participation on a series of certifications related to employment levels, restoration of compensations and benefits, outsourcing and offshoring, collective bargaining agreements and union organizing. When it comes to business, innovation is changing everything. 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. At the time of this publication, the MSLP isn’t live. But what is the Main Street Lending Program? Citrin Cooperman is an independent member firm of Moore North America, which is itself a regional member of Moore Global Network Limited (MGNL). 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. The Main Street Lending Program is the latest lending initiative aimed at helping businesses navigate the economic uncertainty of the COVID-19 pandemic. The Federal Reserve announced the Main Street Lending Program on April 9, 2020. Those materials are available here. Below is a list of frequently asked questions in regard to the eligibility and requirements for a MSLP loan. Is collateral required for Main Street Loans? Depending on the credit facility, eligible businesses can apply for loans ranging from $500,000 to $25 million. Should we extend our current loan or apply for a new loan. Their membership in, or association with, Moore Global Network Limited should not be construed as constituting or implying any partnership between them. Dealers should consult with their own legal and other professional advisors to determine their legal obligations in response to the Covid-19 crisis. "11 The guidance appears to refine this "commercially reasonable efforts" standard and explains that a Main Street borrower should "undertake good-faith efforts to maintain payroll and retain employees, in light of its capacities, the economic environment, its available resources, and the business need for labor. Revenue. In exchange for the loan, employers must make reasonable efforts to maintain payroll and retain workers. 1 The Main Street program implemented by the Federal Reserve should not be confused with the "Assistance to Mid-Sized Businesses" provisions in the CARES Act. He can be reached at (206) 302-6777 or james.rothenberger@mossadams.com. Eligible borrowers agree not to pay dividends, or make other capital distributions with respect to its common stock, until 12 months after the loan is no longer outstanding. Assurance, tax, and consulting offered through Moss Adams LLP. 5 On June 8, 2020, the Federal Reserve indicated that it is “working to establish soon one or more loan options that are suitable for non-profit organizations.”. The Main Street program is not like the SBA's PPP, in which small business applicants that meet the basic eligibility requirements are processed by banks without much additional case-by-case review by the lender. Other forms of organization may be considered for inclusion as a Business under the Facility at the discretion of the Federal Reserve. The Federal Reserve expanded the Main Street Lending Program (MSLP) on April 30, 2020. Businesses should count as employees all full-time, part-time, seasonal or otherwise employed persons, excluding volunteers and independent contractors. To date, the SPV is authorized to purchase loan participations until September 30, 2020. Each lender is expected to conduct an assessment of each potential borrower’s financial condition at the time of application. Working Mother Names BDO USA, LLP as one of the 100 Best Companies. The Federal Reserve is changing the rules of its Main Street Lending Program to help smaller businesses that have been struggling to get by while … No Buybacks of Publicly Traded Equity. The tax function is transforming. 2 See 12 U.S.C. Those eligibility criteria are summarized in the section below on eligible borrowers. Must commit 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, except that an S corporation or other tax pass-through entity that is 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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