Knowledge and Insights

The Main Street Lending Program: An Alternative to the PPP

The lender portal for the Federal Reserve’s Main Street Lending Program (MSLP) has opened as the alternative to the Paycheck Protection Program (PPP).

Unlike the PPP, the Main Street Lending Program’s loans are not forgivable, although they are at low interest rates. The program is being offered through the Federal Reserve rather than the SBA and was initially targeting large and midsize businesses. However, the Fed and the Treasury have been expanding the criteria. Last week, Federal Reserve chairman Jerome Powell announced that the minimum loan size would be lowered from $500,000 to $250,000, and the term of each loan option has increased from four years to five years.  The Fed and the Treasury are also considering expanding the program to nonprofit organizations in addition to businesses.

The Main Street Lending Program could be helpful to businesses that have experienced frustration with the Paycheck Protection Program and its ever-changing rules, although it too has already undergone a number of changes since it was first announced, including expanded eligibility for smaller businesses.

According to the Federal Reserve, U.S. businesses may be eligible for loans under the Main Street Lending Program if they meet either of the following conditions: (1) the business has 15,000 employees or fewer; or (2) the business had 2019 revenues of $5 billion or less. Loans issued under the program have a five-year maturity, deferral of principal payments for two years, and deferral of interest payments for one year. The program will operate through three facilities: the Main Street New Loan Facility (MSNLF), the Main Street Priority Loan Facility (MSPLF), and the Main Street Expanded Loan Facility (MSELF). Eligible lenders can originate new loans under MSNLF and MSPLF, or increase the size of existing loans under MSELF that have been made to eligible businesses.

At this point, only the lender portal went live this week, but the program itself has not yet been opened to borrowers.

Access the link below for the Fed’s FAQs page on this topic.

Mercadien’s advisors are continuing to monitor developments to keep our clients informed. If you have any questions about the MSLP, PPP or other relief options available, please feel free to contact us.

DISCLAIMER: This advisory resource is for general information purposes only. It does not constitute business or tax advice, and may not be used and relied upon as a substitute for business or tax advice regarding a specific issue or problem. Advice should be obtained from a qualified accountant, tax practitioner or attorney licensed to practice in the jurisdiction where that advice is sought.