Following the enactment of the CARES Act, the Federal Reserve announced the establishment of the Main Street Lending Program (the “MSLP”) on April 9, 2020. Initially, the MSLP created the Main Street New Loan Facility (the “New Loan Facility” or “NLF”) and the Main Street Expanded Loan Facility (the “Expanded Loan Facility” or “ELF”). On April 30, 2020, the Federal Reserve expanded the program with a third facility, the Main Street Priority Loan Facility (the “Priority Loan Facility” or “PLF”). The Federal Reserve will lend to a single Special Purpose Vehicle (the “SPV”) which then uses those funds to purchase participation in eligible loans from eligible lenders.
The three loan facilities subject lenders and borrowers to the same criteria. Loans made under each of the facilities provide practically the same terms: interest rate, maturity date, one-year deferral of principal and interest, and no prepayment penalty.
The differences between the three loan facilities relate chiefly to the maximum amounts that can be borrowed and restrictions on repayment of a borrower’s other debts. Additionally, while the New Loan Facility and the Priority Loan Facility will finance loans that were originated on or before April 24, 2020, the Expanded Loan Facility will finance additional credit added to loans already in existence on or before April 24, 2020. Because borrowers may only participate in one of the facilities, it is important to note the differences and similarities in each.
To learn more about the program and view a summary of the Federal Reserve term sheets follow this link; https://www.sherin.com/wp-content/uploads/2020/05/Client-Alert-Main-Street-Lending-Program-00967161-2-002-6.pdf