Main street lending program and foreign owned companies
If you are a US based business looking for financial assistance, you may want to explore taking advantage of the Main Street Lending Program (“MSLP”). Foreign owned US based businesses may also take advantage of this program.
The Federal Reserve established the Main Street Lending Program (MSLP) to promote lending to a wide variety of small and medium-sized businesses to help maintain operations and payroll. The MSLP operates through three lending facilities (New Loan Facility, Priority Loan Facility, Expanded Loan Facility) that mainly differ according to loan size and repayment conditions. The Federal Reserve does not extend loans directly to borrowers but through lenders, which include US banks.
The Federal Reserve has already identified the requirements to be met by borrowers and is about to launch the program.
To qualify for an MSLP loan, a borrower, among other things, must certify that it meets at least one of the following two conditions: (i) the borrower has 15,000 employees or fewer, or (ii) the borrower had 2019 annual revenues of $5 billion or less. To determine eligibility, a business’s employees and 2019 revenues are calculated by aggregating the employees and 2019 revenues of the business itself with those of the business’s affiliated entities.
The following are other important features of the program:
- loans may be repaid under the program over a four-year period. The size of a loan range from $500,000 to $200 million at the adjustable interest rate of LIBOR (1 or 3 months) plus 300 basis points;
- the principal and interest payments are deferred during the first year to assist businesses facing temporary cash flow interruptions;
- businesses that have received loans under Paycheck Protection Program (PPP) may still apply for a loan under the MSLP, however unlike loans under the PPP, which can potentially become grants that do not need to be repaid, MSLP loans cannot be forgiven;
- financial conditions and creditworthiness of potential borrowers are evaluated by each lender, which shall apply its own underwriting standards, and ultimately, determine whether a borrower qualifies to receive assistance under the MSLP;
- a subsidiary of a foreign company may be eligible for assistance under the MSLP if specific conditions are satisfied.
The business must be able to make all of the certifications and covenants required under the program.
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