The Federal Reserve's Main Street Lending Program

Fennemore Craig Client Alert

The Federal Reserve’s Main Street Lending Program

On April 16—only two weeks after applications first opened for the $349 billion Paycheck Protection Program (the “PPP”)—the U.S. Small Business Administration announced the PPP’s allotted funds were depleted. While Congress is currently negotiating a plan to replenish the money, an agreement has yet to materialize. Banks have warned that even if Congress reaches a deal this week, any additional funding could be depleted in as little as 48 hours1. For businesses left without access to funds after the sudden halt to the PPP, one possible alternative is the Main Street Lending Program (the “Main Street Program”).
On April 9, the Federal Reserve established the Main Street Program to aid small and medium-sized businesses affected by the COVID-19 pandemic. The Main Street Program enables the Federal Reserve to purchase up to $600 billion in qualifying loans from lenders that lend to U.S. businesses. Businesses that have already taken advantage of the PPP are eligible to participate in the Main Street Program2.
Like the PPP, loans under the Main Street Program will be extended through banks. Such loans are required to have the following features:

  • 4-year maturity
  • Deferment of interest and principal for one year
  • Variable interest rate based on the Secured Overnight Financing Rate, but rates currently range between 2.5 % and 4 %
  • The minimum loan amount is $1 million
  • The maximum loan amount is capped at the lesser of (i) $25 million or (ii) the loan amount that results in a four times debt-to-EBITDA ratio based on the borrower’s existing outstanding and committed but undrawn debt and its 2019 EBITDA
  • Loans are not forgivable


The Main Street Program is available to businesses with up to 10,000 employees or as much as $2.5 billion in revenue. While the Federal Reserve is expected to release more guidance on the issue, there has been no indication that the Small Business Association’s affiliation rules apply. Borrowers must also be U.S. companies, with significant operations and a majority of its employees in the United States.
Borrowers cannot use the proceeds from a loan under the Main Street Program to pay down other debt. Borrowers must also attest that they require the financing due to exigent circumstances presented by the COVID-19 pandemic and that they will “make reasonable efforts” to maintain payroll and retain employees. Lastly, the Main Street Program places restrictions on the payment of dividends and distributions, as well as the amount of compensation that can be paid to officers and employees.
The Federal Reserve has published term sheets for the Main Street Program on its website. Interested businesses should contact their lender to discuss whether they can take advantage of the Main Street Program. As always, we will continue to provide updated information as it becomes available. If you have questions about the Main Street Program, please feel free to contact one of our business and finance attorneys.



[1] Zachary Warmbrodt, Banks warn that new small-business funding could evaporate in 2 days, POLITICO (April 20, 2020, 6:41 PM),
[2] The Federal Reserve will administer the Main Street Program through a single special purpose vehicle. However, the Main Street Program actually consists of two different lending facilities, the Main Street New Loan Facility (“MSNLF”), and the Main Street Expanded Loan Facility (“MSELF”). The MSNLF will purchase unsecured loans originated on or after April 8, 2020, and the MSELF will purchase loans originated before April 8, 2020. This alert focuses solely on the MSNLF.

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