Main Street Lending Program: Federal Reserve expands scope and eligibility for small and mid-size business loans

New terms include expanding eligible businesses, lowering the minimum loan size, and expanding the credit options.


COVID-19 Alert


The Federal Reserve has announced a revised Main Street Lending Program that will allow larger companies and businesses with more pre-existing debt access to loans intended to counter losses incurred from the coronavirus disease 2019 (COVID-19) pandemic. The new program creates a third loan option and clarifies a number of key issues.

Changes announced from the original terms for the Main Street Lending Program, which has not yet launched, include the following:

  • Eligible borrowers are those with up to 15,000 employees, or up to $5 billion in annual revenues in 2019 – a change from the original terms, which limited eligibility to companies with up to 10,000 employees and $2.5 billion in revenue.
  • An added third “priority” loan option, with increased risk sharing by lenders for eligible borrowers with greater leverage – eligible lenders would retain a 15 percent share on loans and a lower amortization rate.
  • The minimum loan size for “new” or “priority” loans has been lowered to $500,000, down from $1 million, whereas the minimum for “expanded” loans has increased from $1 million to $10 million.
  • The maximum loan for the “expanded” loans changed to the lesser of (i) $200 million (increased from $150 million), (ii) 35 percent (increased from 30 percent) of the eligible borrower’s existing outstanding and undrawn available debt that is pari passu in priority with the eligible loan and equivalent in secured status (i.e., secured or unsecured), or (iii) an amount that, when added to the eligible borrower’s existing outstanding and undrawn available debt, does not exceed six times the eligible borrower’s adjusted 2019 earnings before interest, taxes, depreciation, and amortization (“EBITDA”).
  • Affiliation rules apply when determining eligibility, which aggregates the employees and 2019 revenues of the eligible borrower itself with those of its affiliated entities in accordance with the affiliation test set forth in 13 CFR 121.301(f) (generally, entities are affiliates of each other when one controls or has the power to control the other, or a third party or parties controls or has the power to control both).
  • Companies that receive Small Business Administration (SBA) Paycheck Protection Program (PPP) loans can borrow under this loan program.

On April 30, 2020, the Federal Reserve published the terms sheets for the updated Main Street New Loan Facility and the Main Street Expanded Loan Facility, as well as for the new Main Street Priority Loan Facility, along with a set of answers to Frequently Asked Questions (FAQs). Basic details, including terms, minimum and maximum loan sizes, risk retention, payment and risk are summarized in a chart issued by the Federal Reserve, reproduced at the end of this alert.


Our April 13, 2020 DLA Piper alert discussed how the Main Street Lending Program provides assistance to employers of various sizes struggling with the COVID-19 pandemic’s economic impacts. Under the original program, the Federal Reserve will commit to lend to a single common special purpose vehicle (SPV) on a recourse basis. The SPV will purchase 85 percent to 95 percent participations in the eligible loans from lenders. The Treasury Department will provide $75 billion in equity for the program using funds from the Coronavirus Aid, Relief, and Economic Security (CARES) Act, enacted in late March 2020. The combined size of the lending facilities will be $600 billion. These loans could be a lifeline for small and mid-size businesses that need financing due to the “exigent circumstances” presented by the COVID-19 pandemic. The Federal Reserve did clarify that the availability of additional credit is intended to help companies that were in sound financial condition prior to the onset of the COVID-19 pandemic maintain their operations and payroll until conditions normalize.

As updated, the Main Street Lending Program has the following three main lending programs:

  • The Main Street Expanded Loan Facility (“MSELF”). Under the MSELF, eligible lenders increase (or “upsize”) existing term loan or revolving loan facilities that have a remaining term of at least 18 months (which can be extended at the time of upsizing) for loans that were originated before April 24, 2020 (provided it was upsized after April 24, 2020).
  • The Main Street New Loan Facility (“MSNLF”). Under the MSNLF, eligible lenders provide for new loans to eligible borrowers that were originated on or after April 24, 2020. The maximum principal amount of the loan is based on four times EBITDA.
  • The Main Street Priority Loan Facility (“MSPLF”). Like the MSNLF, loans under the MSPLF are new loans to eligible borrowers that were originated on or after April 24, 2020, however the maximum principal amount of the loan is based on six times EBITDA (vs. four times EBITDA for the MSNLF).

Under the three facilities, a vehicle set up by the Federal Reserve Bank of Boston, which is administering the program, purchases 85 percent of MSPLF loans and 95 percent of MSNLF and MSELF loans to eligible borrowers made by eligible lenders. Eligible lenders must retain the remaining portion of each eligible loan until it matures (or the underlying loan utilized under the MSELF matures) or the SPV sells all of its participation in the loan, whichever comes first.

Loan terms

Each MSELF loan must be for at least $10 million and not exceed the lesser of (i) $200 million; (ii) 35 percent of a borrower’s outstanding debt; and (iii) six times 2019 adjusted EBITDA. Each MSNLF loan and MSPLF loan must be for at least $500,000 and not exceed the lesser of (i) $25 million and (ii) four (for MSNLF loans) or six (for MSPLF loans) times 2019 adjusted EBITDA.

Loans under each of the Main Street facilities accrue interest at the London Inter-bank Offered Rate (LIBOR) + 300 basis points, are NOT forgivable, and are repayable over four years, with principal and interest deferred in the first year. Unpaid interest will be capitalized. 

Amortization for loans under the MSNLF and MSELF are amortized one third each year for the last three years, while loans under the MSPLF are amortized 15 percent in years two and three and 70 percent in year four. Transaction and origination fees apply to each loan. For the upsized portion of a MSELF loan, eligible borrowers will pay a 75 basis points transaction fee and a 75 basis points origination fee; for a MSNLF loan or MSPLF loan, eligible borrowers will pay a 100 basis points transaction fee and 100 basis points origination fee.

The programs are authorized under section 13(3) of the Federal Reserve Act, which provides the Federal Reserve with greater latitude than its normal lending authority in emergency situations.

Borrower eligibility determinations

Eligibility criteria for the three facilities were updated on April 30, 2020, allowing companies with up to 15,000 employees or up to $5 billion in annual revenue to qualify for the loans. Businesses must meet one (not both) of these two conditions.

To determine eligibility, a business’s employees and 2019 revenues are calculated by aggregating the employees and 2019 revenues of the business itself, along with its affiliated entities, in accordance with the affiliation test set forth in 13 CFR 121.301(f). Under this provision, entities are affiliates of each other when one controls or has the power to control the other, or a third party (or parties) controls or has the power to control both, regardless of whether control is exercised, so long as the power to control exists.

Generally, eligible borrowers must be businesses created or organized in the US before March 13, 2020 with significant operations in and a majority of their employees based in the US. Certain businesses are specifically ineligible, including financial businesses primarily engaged in the business of lending, and businesses in which the lender owns an equity interest. The list of “Ineligible Businesses” is referenced in the FAQ document and are listed in 13 CFR 120.110(b)-(j), (m)-(s). 

Businesses may only participate in one Main Street Lending Program and may not participate in the Federal Reserve’s Primary Market Corporate Credit Facility (PMCCF). However, a business that receives a loan through the SBA’s PPP may be eligible. An eligible borrower may obtain more than one loan under a single Main Street facility, provided that the sum of MSNLF loans or MSPLF loans for a single eligible borrower may not exceed $25 million, and the sum of MSELF upsized tranches received by a single borrower cannot exceed $200 million.

Eligible borrowers must also have positive EBITDA to participate in the Main Street Lending Program. The Federal Reserve acknowledged that this would preclude nonprofit corporations and certain asset-based borrowers from participating in the Main Street Lending Program, and noted it will evaluate the feasibility of adjusting the borrower eligibility criteria and loan eligibility metrics for such entities. Any existing loan that a borrower had outstanding with the eligible lender as of December 31, 2019 must have had an internal risk rating (based on the eligible lender’s risk rating system) equivalent to a “pass” in the Federal Financial Institutions Examination Council’s (FFIEC) supervisory rating system as of that date.

Lender information

Federally insured depository institutions (including banks, savings associations, and credit unions), as well as US branches or agencies of foreign banks, US bank holding companies, US savings and loan holding companies, US intermediate holding companies of foreign banking organizations, or any US subsidiary of these firms are eligible to participate. While non-bank financial institutions are currently not considered eligible lenders, the Federal Reserve is considering options to expand the eligible lender list in the future.

For the MSELP, an eligible lender must be one of the lenders that holds an interest in the underlying loan at the date of the upsizing.

Eligible lenders are advised to view the eligibility criteria in the term sheets as the minimum requirements for the Main Street Lending Program. Eligible lenders are expected to conduct an assessment of each potential borrower’s financial condition at the time of the potential borrower’s application, apply their own underwriting standards, and may require additional information from potential borrowers.

“Strings attached”; certifications and covenants

Loan recipients must adhere to the direct loan restrictions delineated in the CARES Act, including a ban on stock buybacks and dividends (exclusive of tax distributions by flow-through entities such as S-corporations or limited liability companies), as well as limits on executive compensation for the term of the loan and one year after.

Borrowers may not use proceeds from MSNLF or MSELF loans to prepay other loans and may not cancel or reduce other committed credit lines (except in an event of default or reductions in availability due to changes in borrowing bases or reserves in asset-based structures); however, proceeds from MSPLF loans may, at origination, be used to refinance existing debt owed by the eligible borrower to a lender that is not the eligible lender of the MSPLF loan. Mandatory debt payments (such as payment when due or based on default and acceleration) are permitted.

The Main Street Lending Program does not have an explicit numerical employee retention requirement but does call on borrowers to make “commercially reasonable efforts to retain employees” and that businesses make “good-faith efforts to maintain payroll” considering the economic environment, the need for labor, and available resources. Companies that have already laid off or furloughed workers because of the COVID-19 pandemic still can apply for Main Street loans. Borrowers’ names and loan amounts will be released to the public each month by the Federal Reserve.

The EBITDA calculations

For MSNLF and MSPLF, the methodology used by the eligible lender to calculate adjusted 2019 EBITDA for an eligible borrower must be a methodology previously used by such lender for adjusting EBITDA when extending credit to the eligible borrower or to similarly situated borrowers on or before April 24, 2020.

For MSELF eligible loans, the methodology used by the eligible lender to calculate adjusted 2019 EBITDA for the eligible borrower must be the methodology  previously used by such lender for adjusting EBITDA when originating or amending the underlying loan on or before April 24, 2020.

For purposes of calculating leverage, eligible borrowers should count all outstanding and undrawn available debt, including most unused commitments under any loan facility.

Employee calculations

A borrower’s employees include all full-time, part-time, seasonal, or otherwise employed persons and those employed by affiliates, but shall not include volunteers or independent contractors. Temporarily furloughed employees are included. A majority of the employees need to be based in the United States. Borrowers should use the average of the total number of persons employed by the borrower and its affiliates for each pay period over the 12 months before receiving the Main Street loan.  We note that a number of the employment-related covenants contained in the CARES Act (such as 90 percent headcount maintenance, outsourcing/offshoring restrictions, collective bargaining agreement compliance, or union neutrality) generally do not apply to the Main Street Loan Program.


Because the Federal Reserve cannot lend to insolvent borrowers, an eligible borrower must certify that it has a reasonable basis to believe that, as of the date of the eligible loan and after giving effect to such loan, it has the ability to meet its financial obligations for at least the next 90 days and does not expect to file for bankruptcy during such period. 

Collateral and subordination

MSNLF and MSPLF loans, and MSELF upsized tranches, may be secured or unsecured. An MSELF upsized tranche must be secured if the underlying loan is secured. In such case, any collateral securing the underlying loan (at the time of upsizing or on any subsequent date) must secure the MSELF upsized tranche on a pro rata basis.

The MSNLF loans must not be contractually subordinated in terms of priority to any of the eligible borrower’s other loans or debt instruments. However, the eligible borrower may have or obtain additional secured or unsecured debt after incurring the MSNLF loan, provided that the new debt would not have higher contractual priority in bankruptcy than the MSNLF loan.

The MSPLF loans and MSELF upsized tranches must be senior to or pari passu with, in terms of priority and security, the eligible borrower’s other loans or debt instruments, other than mortgage debt.

Political pushback?

Media reports have indicated that the revised terms for the Main Street Lending Program will make it easier for companies in the energy sector to borrow from the fund and suggest that the eligibility expansion came about at least in part because of pressure from elected officials from oil-producing states. In an April 21, 2020, letter, a group of Republican lawmakers asked the Federal Reserve to adjust the terms of the Main Street Lending Program to make more oil companies eligible for the help. This has resulted in criticism from environmental groups and Congressional Democrats – among them Senate Minority Leader Chuck Schumer (D-NY), who said the updated Federal Reserve’s terms could serve to “bail out big oil companies … while so many Main Street businesses are still waiting to get help.”

Going forward

Updates regarding the Main Street Lending Program, including the official launch date and the time and date at which the Main Street SPV will begin purchasing participations in MSNLF loans, MSPLF loans, and MSELF upsized tranches, will be made available on the Federal Reserve Board’s Main Street Lending Program page. The program will be in effect until September 30, 2020. Eligible borrowers contemplating a loan under the Main Street Lending Program are advised to contact their lenders now to make initial preparations for applying for a loan once the program formally launches.


Main Street Lending Program Loan Options

New Loans

Priority Loans

Expanded Loans


4 years

4 years

4 years

Minimum Loan Size




Maximum Loan Size

Lesser of $25M or 4x 2019 adjusted EBITDA

Lesser of $25M or 6x 2019 adjusted EBITDA

Lesser of $200M, 35% of outstanding and undrawn available debt, or 6x 2019 adjusted EBITDA

Risk Retention




Payment (year one deferred for all)

Years 2-4: 33.33% each year

Years 2-4: 15%, 15%, 70%

Years 2-4: 15%, 15%, 70%


LIBOR + 3%

LIBOR + 3%

LIBOR + 3%


For further questions, please contact the authors, any attorney in our Corporate or Federal Law and Policy group, or your DLA Piper relationship partner.

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This information does not, and is not intended to, constitute legal advice.  All information, content, and materials are for general informational purposes only.  No reader should act, or refrain from acting, with respect to any particular legal matter on the basis of this information without first seeking legal advice from counsel in the relevant jurisdiction.