Resources on the Main Street Lending Program to Support Small and Mid-Sized Businesses

As part of Rapid7’s mission to support the community during this difficult (AKA surreal and dangerous) time, we are drawing attention to new financial resources to help businesses in need. Below is information on a program for small and mid-sized businesses from the Federal Reserve. Please see this blog post for information on Small Business Administration programs (one of which is currently, and hopefully temporarily, on hold).

The recent stimulus legislation – the “CARES Act” – allocated up to $600 billion for a new Main Street Lending Program to provide relief to small and mid-sized businesses impacted by the COVID-19 pandemic. Under the new program, the Federal Reserve will provide liquidity to lenders to support loans to eligible businesses. The loans are reported available until Sep. 30, 2020, unless the programs are extended.

The Federal Reserve has indicated that it may make changes to the terms of the program. To stay abreast of the latest details, the Fed’s page for the program is HERE.

Eligibility

The Main Street Lending Program applies to businesses with up to 10,000 employees, or, businesses with up to $2.5 billion in annual revenue. Eligible businesses may apply for both the Main Street Lending Program and the CARES Act’s new Paycheck Protection Program (PPP); however; they are not permitted to participate in the new Primary Market Corporate Credit Facility.  

To be eligible, businesses will be required to comply with the lending program restrictions on executive compensation, stock purchases, and capital distribution laid out in the CARES Act. That means no stock buybacks, dividend payments, capital distributions, or raises for employees with compensation of more than $425K – until 12 months after the loan has been repaid. The Main Street loans may also not be used to pay down or refinance existing debt.

Program details

The loans are divided into two categories: New Main Street Loans, and Expanded Main Street Loans. Loan interest rates are between 2.5% – 4% (plus the Secured Overnight Financing Rate, currently at 0.1%).The loans mature in four years and payments will be deferred until the second year of the loan. Unlike PPP loans, loans under the Main Street Lending Program are not forgivable.

New Main Street Loans: The minimum loan size is $1 million. The maximum is $25 million or four times the borrower’s 2019 earnings. The loans are unsecured – no collateral required.

• Fed. Reserve term sheet: HERE.

Expanded Main Street Loans: The minimum loan size is $1 million. The maximum is $150 million, 30% of the borrower’s existing outstanding and committed but undrawn bank debt, or six times the borrower’s 2019 earnings. Collateral may be required to participate in this program.

• Fed. Reserve term sheet: HERE.

For additional information from Rapid7 on our priorities and activities related to the pandemic, please check out this blog post from our CEO, Corey Thomas, as well as this series of posts tagged with COVID-19. We wish everyone the best during this time and are confident that better days are ahead.