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Main Street Lending program

April 17, 2020

CPA is working to keep you up to date on the CARES Act lending programs. Here is additional information that may help your business regarding the new Main Street Lending program and the previously announced Paycheck Protection Program (PPP).

The PPP is the most popular lending program because the loan is forgiven as you pay certain expenses such as payroll. However, it is temporarily out of money and is generally limited to firms with less than 500 employees. You should know that Congress is expected to re-fund this program soon as they iron out their differences. Also, some companies are eligible if they have 500 to 1500 employees depending upon their North American Industry Classification System (NAICS) code in the SBA Table.

The new-ish program is the Main Street Lending Program that larger companies can take advantage of. 

This "Main Street Lending" program provides:

  • 4-year loans through U.S. lending institutions such as federally insured banks.
  • Principal and interest deferred for one year.
  • An adjustable secured overnight finance rate (SOFR) + 2.5-4.0%.
  • No penalty for prepayment.
  • $1 million Minimum loan size.
  • Maximums:
    • For a new loan, Lesser of-
      • $25 million, or
      • 4x the company's earnings before interest, taxes, depreciation, and amortization (EBITDA) when added to the company's existing outstanding and committed but undrawn debt.
    • For an expanded loan total. Lesser of –
      • $150 million,
      • 4x the company's EBITDA when added to the company's existing outstanding and committed but undrawn debt, or
      • 30% of the company’s existing outstanding and committed but undrawn debt.

These Main Street loans are available to Businesses created or organized in the United States and with "significant operations" and a majority of employees based in the United States, and:

  • Eligible companies can have employment up to 10,000 workers, or
  • Annual revenues in 2019 of less than $2.5 billion.

Additional specifics of Main Street Loans:

  • Can apply for in addition to SBA loans, but cannot serve same purpose (ie. Payroll).
  • Main Street loans are not forgivable
  • Cannot be used to repay or refinance preexisting loans or lines of credit made by the lender of the Main street loan.
  • Any existing lines of credit outstanding to the company cannot be canceled or reduced.
  • Full repayment of Main Street loan is prioritized over any other debts of equal or lower priority except mandatory principal payments.
  • Must attest to the Main Street Loan is necessary due to the exigent circumstances presented by the COVID-19 pandemic.
  • Must make reasonable efforts to maintain its payroll and retain its employees with the loan proceeds during the term of the loan.
  • Additional limitations related to compensation, stock repurchase, and capital distribution restrictions.

Additional note on CARES Act Paycheck Protection Program: Companies between 500 and 1500 employees should check the accuracy of their North American Industry Classification System (NAICS) code in the SBA Table. Certain industries have a higher employee Small Business size limitations.

Please contact David Morse, CPA Tax Policy Director (david@prosperousamerica.org) if you want more information. 

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