Main Street Lending Program Now Open to Not-for-Profits

The Federal Reserve Board has announced that the Main Street Lending Program is now fully operational and accepting submissions of eligible loans to not-for-profit (NFP) organizations through the lender portal by registered eligible lenders. The Main Street Lending Program is designed to support small and medium-sized for-profit businesses and NFP organizations that were unable to access the Paycheck Protection Program (PPP) or that require additional financial support after receiving a PPP loan. Main Street loans are not forgivable, and the underwriting requirements are somewhat restrictive. All Main Street Lending Programs are available through at least Dec. 31, 2020.

The two available NFP programs are the Nonprofit Organization New Loan Facility (NONLF) and the Nonprofit Organization Expanded Loan Facility (NOELF). NFP organizations employing between 10 and 15,000 workers or with revenues of less than $5 billion are eligible to participate in these programs. The NONLF allows loans of between $250,000 and the lesser of (i) $35 million or (ii) the borrower’s average 2019 quarterly revenue. The NOELF is aimed at upsizing an existing term loan or revolving credit. The underwriting criteria for both programs require NFP borrowers to meet several criteria, including, but not limited to: (1) 2019 operating margin (before interest, depreciation, and amortization) of 2 percent or more; (2) current days cash on hand of 60 days of 2019 operating expenses; and (3) ratio of liquid assets to debt (counting the Main Street loan and any Medicare accelerated payments) of greater than 55 percent. Borrowers utilizing the PPP may also use the Main Street Lending Program, if they meet the eligibility requirements for both.

A borrower must attest, among other things, that it needs financing due to the pandemic, and that it will make reasonable efforts to use the loan to maintain its payroll and retain its employees during the term of the loan. In addition to five-year maturities and two-year deferral of principal and interest payments, these loans will have an adjustable rate of the London Interbank Offered Rate (LIBOR) plus 300 basis points, with no prepayment penalties. The current LIBOR 1-month and 3-month rates result in an overall interest rate of less than 3.5 percent.

The Federal Reserve System webpage and the Federal Reserve Bank of Boston’s Information for Nonprofit Borrowers webpage provide updated information on the program, including term sheets and forms/agreements for the lending options, an updated Frequently Asked Questions (FAQ) document, and a recorded webinar on the program. The Nonprofit Organization FAQs were recently amended to reflect that the NONLF and NOELF are now operational. A total of 13 banks and credit unions in New York State are participating lenders in these NFP programs.

Contact: Dan Heim, dheim@leadingageny.org, 518-867-8866