The Main Street Lending Program: Your questions answered

Many small businesses have applied for forgivable loans from the Paycheck Protection Program, but in some cases, it’s simply not enough. Businesses who need more support may be eligible for the Main Street Lending Program, a separate program that will offer low-interest loans to small and medium-sized businesses.

Here’s what you need to know. 

What is the Main Street Lending Program?

The Main Street Lending Program was created as part of the CARES Act and will provide $600 billion in financing for small and medium-sized businesses. Loans are issued through banks and credit unions and backed by the Federal Reserve Bank. 

Can I apply for a Main Street Lending Program loan?

To apply for a loan under the Main Street Lending Program, your business must meet these criteria:

1. You’ve been in business since at least March 13, 2020
2. You’re an eligible business according to Small Business Administration (SBA) regulations 
3. You have no more than 15,000 employees or your revenue from 2019 was $5 billion or less.  

See the Federal Reserve Board website for additional borrower criteria. 

How do I apply for a Main Street Lending Program loan?

The loans are issued by US banks and credit unions. A lender does not need to be an SBA lender to make loans under this program.

Contact your bank (or a local bank or credit union if you do not have a business bank) to apply. The bank will assess your business as it would for any other loan.

They are likely to require cash flow statements, a balance sheet, payroll records, and income tax returns to establish the business’s creditworthiness. If your business is a sole proprietorship, your personal credit may be assessed as well. 

How much can I get?

Loans are available in amounts ranging from $500,000 to $200 million. The amount you qualify for will depend on the size of your business and the amount of outstanding debt you have, among other things. The lender will determine if you are eligible for the amount you are requesting. The loans will be issued by the lender but backed by the Federal Reserve, so they are less risky for the lender than traditional loans. 

What are the terms?

The loans must be paid back within four years, with payments deferred for the first year. The interest rate is adjustable and is calculated at LIBOR +3%. LIBOR is the London Interbank Offer Rate, or the rate that banks charge each other for loans. In this low-interest environment, LIBOR has been hovering around 0.3 – 0.5%. So the initial rate would be about 3.3 – 3.5%, but it could increase if interest rates rise.

There is also a lender transaction fee of 1% of the loan amount, which may be paid by the borrower, and a borrower origination fee of 1%. 

There are three types of Main Street Lending Program Loans: Main Street New Loans, Main Street Priority Loans, and Main Street Expanded Loans. New loans will be repaid evenly, with 33.33% due in each of years two through four. For priority and expanded loans, 15% of the loan must be paid in year two and in year three, and the remaining 70% must be paid in year four. You can only apply for one of the three types of loans. 

Fast facts about MSL

Can an MSL loan be forgiven, like a Paycheck Protection Program loan?

No. A Main Street Lending Program loan must be repaid within four years. There is no penalty for repaying it early. 

If I got a PPP loan, can I get an MSL loan too?

Yes. Businesses who have received loans under the Paycheck Protection Program may also be eligible for Main Street Lending Program loans, as long as they meet the criteria. 

If I was turned down for a PPP loan, can I still get an MSL loan?

Depending on the reason you were turned down for a PPP loan, you may be eligible for a Main Street Lending Program loan. If you were turned down because your business was too large for a PPP loan, an MSL loan may be a good choice for you. If you were turned down because your business is not eligible under SBA rules, you will not be eligible for an MSL loan either. Check with your bank for your eligibility. 

When can I apply?

The Main Street Lending Program is expected to begin issuing loans at the end of May, 2020. Watch the news and the FRB website for updates. 

For more information on applying for a Main Street Lending Program loan, see the Federal Reserve Board website or the US Chamber of Commerce Guide to the Main Street Lending Program.