The Main Street Lending Program: What Your Business Needs to Know

Justin Biel, Contributing Editor Oracle NetSuite and Grow Wire

April 9, 2020

The Federal Reserve Board on April 9 released new details of the Main Street Lending Program(opens in new tab), designed to deploy loans to “small and mid-sized businesses” -- firms with up to 10,000 employees and less than $2.5 billion in annual revenue -- affected by COVID-19.

Unlike the Small Business Administration’s Economic Injury Disaster Loan(opens in new tab) and the Paycheck Protection Program(opens in new tab), both of which are currently open for application and aimed at smaller businesses, the Main Street program will be the first federal relief program also aimed at larger companies(opens in new tab). (Note: If you already applied for a loan with the Paycheck Protection Program, you can also apply(opens in new tab) for a Main Street loan.)

The Federal Reserve Board first announced the program in a March 23 press release(opens in new tab). However, unlike the relief programs aimed at smaller businesses, the program has yet to accept loan applications.

This article covers what we know so far. We’ll update it with new developments as they arise.

 What is the Main Street Lending Program?

After Congress allotted $454 billion(opens in new tab) to the Department of the Treasury to support the Fed’s programs in the wake of COVID-19, a number of lending programs developed to support businesses across the U.S. and stabilize the economy.

The Fed developed one such program, the Main Street lending program, to provide relief for both small and middle-market companies.

Mary Daly, president of the Federal Reserve bank of San Francisco, explained the rationale behind the program in an interview(opens in new tab) with Yahoo Finance.

“There is this whole swath of institutions that don't access capital markets very easily and don’t qualify for small business lending,” she said. “So if you think about it, that's a part of Main Street that still needs to be treated and directly employs millions of workers in the United States.”

 Who is eligible for the Main Street Lending Program? 

Per the Fed’s latest guidelines(opens in new tab) announced on Thursday, a business must meet the following requirements to qualify for a Main Street loan:

Neither the Fed nor banks have yet to issue exact details regarding applicants and how to apply. Earlier reports based on analysis of The CARES Act stated that businesses who get Main Street loans will likely be required, at least on good faith, to rehire at least 90%(opens in new tab) of any employees laid off since January 2020.

Also, according to the Act, those that get loans will “make a good faith certification” including to-dos(opens in new tab) like not outsourcing jobs while repaying the loan and for two years afterward.

How much money can I get from the Main Street lending program?

CNBC reports that loans would have a minimum of $1 million(opens in new tab) and a maximum of either $25 million or an amount that “when added to the Eligible Borrower’s existing outstanding and committed but undrawn debt, does not exceed four times the Eligible Borrower’s 2019 earnings before interest, taxes, depreciation, and amortization,” whatever is less.

What are the terms of these loans?

CNBC reports that interest rates will be just 0.01%(opens in new tab), plus 250-400 basis points(opens in new tab) with a four-year maturity. Principal(opens in new tab) and interest payments will be deferred for one year(opens in new tab), announced the Fed.

Who serves as lenders for the Main Street lending program? 

Lenders for the Main Street program will be financial institutions, such as large banks. The government will purchase 95% of the loan(opens in new tab) while the financing institution will hold the other 5%.

How will I apply for a loan?

Businesses will apply directly with the lender, though neither the Fed nor banks have released details about the process. It’s usually recommended to apply for a loan at the bank you currently work with.

“The application process will certainly vary by bank – larger banks may leverage a portal to take in applications, while smaller banks may require an application and supporting documentation to be submitted to a specific branch or through email,” said Brandon Koeser(opens in new tab), senior manager and financial services senior analyst with RSM US LLP, a middle-market consulting firm.

If your bank is using a portal to collect applications for the Paycheck Protection Program(opens in new tab), it’s “more likely they’ll use a portal” for Main Street loan applications, he added.

When will I be able to apply?

The Fed’s much-anticipated(opens in new tab) Thursday announcement provided new details about the Main Street Lending Program, but it didn’t outline an application process.

Koeser acknowledged that “we are still in wait-and-see mode” with regard to a program launch date. It could be later rather than sooner, he added, referencing the fact that many banks weren’t ready to accept loan applications(opens in new tab) when the Paycheck Protection Program launched last week.

“In light of how the rollout of the Paycheck Protection Program has gone with the SBA and participating lenders, it is possible that the Fed will take all of those weeks to craft the necessary rules and lay out the application and funding process,” he said.

Is there anything I can do now to prepare?

Koeser expects the Main Street loan application to require similar documents to the Paycheck Protection Program(opens in new tab).

To get prepared now, he recommends gathering:

  • Payroll filings reported to the IRS for 2019
  • Payroll records supporting your compensation expenses and total workforce numbers.

“The important thing to remember is that this stimulus is designed to get into the hands of those who need it,” Koeser added.

So, while explicit details of the paperwork required aren’t released yet, he recommends preparing any and all information related to payroll that supports your business’s need for a loan.

“The more detail you can pull together on your payroll costs, including IRS filings and payroll reports, the better it will be when it comes time to complete the application,” he added. “Information-gathering could prove to be the most time-consuming part of the application process, so gathering what information you have could save time when it really counts.”

NetSuite has packaged the experience gained from tens of thousands of worldwide deployments over two decades into a set of leading practices that pave a clear path to success and are proven to deliver rapid business value. With NetSuite, you go live in a predictable timeframe — smart, stepped implementations begin with sales and span the entire customer lifecycle, so there's continuity from sales to services to support.