In April, the Federal Reserve announced the $600 Billion Main Street Lending Program (MSLP), which is expected to begin in June. (The date the program will begin is not yet known.) MSLP is designed to help credit flow to small and medium-sized businesses that were in good financial condition, but now need loans to help maintain their operations and payroll until they have recovered from, or adapted to, the impacts of the coronavirus pandemic.
Some MSLP background
Main Street Loans are not grants and cannot be forgiven. These loans are underwritten and approved by eligible lenders and include U.S. insured depository institutions, U.S. bank holding companies, and U.S. savings and loan holding companies. Interested businesses will work with an eligible lender to determine if they meet the program requirements, as well as the lender’s own underwriting standards. The lender will determine whether a business is approved for a loan.
Loans originated under the program include several features designed to help businesses facing financial challenges:
- The program offers 4-year loans with floating rates.
- Principal and interest payments will be deferred during the first year to assist businesses facing temporary cash flow interruptions.
- Loans range in size from $500,000 – $200 million – a wide range to support a broad set of employers.
- The program will offer three different loan types, each with distinct characteristics.
- The Fed will participate in the lending by purchasing an 85 or 95 percent interest in the loan, depending on the facility.
An FAQ document about the program and loan types is available.
Is your FI prepared for MSLP?
Just how many MSLP borrowers will participate is unknown. Some projections have surfaced, ranging from only a small number of businesses will seek lending to larger numbers. Given the complexity and unknown factors surrounding MSLP, eligible financial institutions (FIs) must consider how prepared they are to handle the associated risk as well as the opportunity it brings. If your FI is participating or considering the possibility, listen to a balanced perspective on MSLP in Q2’s recent PrecisionLender podcast, Main Street Lending Is Starting! ... Now What? In addition to the podcast, Q2’s PrecisionLender has developed a Main Street Lending Quick Start Guide that condenses the most critical elements of the program.
Learn more about the PrecisionLender CARES Edition created to help your FI quickly determine a facility fit, and then structure a deal that meets borrower needs and your FI’s objectives. Contact Q2’s PrecisionLender to learn more.
