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Fed Main Street Loan Facilities Extended until December 31, 2020 and Expanded to Nonprofits

On July 17, 2020, the Federal Reserve Bank of Boston released updated terms sheets for two types of loan facilities for nonprofits under the Main Street Lending Program (“MSLP”). Similar to the for-profit facilities, the Nonprofit Organization New Loan Facility (“NONLF”) and Nonprofit Organization Expanded Loan Facility (“NOELF”) are available to organizations which were in sound financial condition before the COVID-19 pandemic. However, a number of eligibility adjustments have been made to accommodate differences in how nonprofits may operate.  

The NONLF and NOELF provide long term loans to 501(c)(3) and 501(c)(19) nonprofits in continuous operation since January 1, 2015. The program is designed for small or medium sized nonprofits, measured as either (i) up to 15,000 employees or (ii) up to $5 billion in 2019 revenue.  Additionally, eligible nonprofits cannot have an endowment of $3 billion or more.

A number of changes were made to the nonprofit terms sheets originally proposed on June 16, 2020, including loosening restrictions on eligibility. Key eligibility criteria now require that the organization must have:

  • At least 10 employees (reduced from 50 in the proposed terms);

  • Non-donation revenue equal to or greater than 60% of its expenses from 2017-2019 (a new requirement not included in the proposed terms);

  • An adjusted 2019 EBIDA to operating revenue ratio of 2% of greater (reduced from 5% in the proposed terms);

  • Liquid assets sufficient to meet its average daily expenses over the previous year for 60 days (decreased from 90 days in the proposed terms); and

  • A ratio of unrestricted cash and investments to existing undrawn debt and certain other liabilities of greater than 55% (decreased from 65% in the proposed terms). 

The maximum loan size for Main Street nonprofit loans are the lesser of (i) $35 million for new loans, or $300 million for expanded loans; or (ii) the organization’s average 2019 quarterly revenue.

Mirroring the for-profit Main Street Lending Program facilities, borrowers may only utilize one of NONLF or NOELF and may not also participate in the Primary Market Corporate Credit facility or Municipal Liquidity Facility, but may have received a Paycheck Protection Program or Economic Injury Disaster Loan. Similarly, borrowers may not use the proceeds to repay other debt before it is due or reduce existing lines of credit.

On July 23rd the Boston Fed released Frequently Asked Questions for the Main Street Nonprofit Lending Facility. Among other clarifications, the nonprofit FAQs provide guidance related to calculation of total and average daily expenses and operating revenue specific to nonprofits. The FAQs also clarify that organizations like public hospitals and public colleges, although tax exempt under a different tax code provision than 501(c)(3), may still be eligible for the facilities if they determine that they could qualify as a 501(c)(3) organization.

The Federal Reserve Board announced on July 28, 2020 that the Main Street Lending Program facilities for for-profit and nonprofit companies would be extended to December 31, 2020, from the originally slated program end date of September 30, 2020. The Fed stated that the extension is intended to enable its continued assistance in economic recovery from the COVID-19 pandemic.

© 2020 Foley & Lardner LLPNational Law Review, Volume X, Number 217

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About this Author

Jamie N. Class Partner Boston Finance Corporate Bankruptcy & Business Reorganizations
Partner

Jamie N. Class is a partner and business lawyer with Foley & Lardner LLP. She advises clients in structuring, negotiating and closing debt financing transactions and restructurings. Jamie has more than 20 years’ experience representing US and global clients as issuers of and investors in debt instruments in a broad variety of debt financing and restructuring transactions.

Jamie is skilled at working with multiple parties to close syndicated secured and unsecured credit facilities, private placements and public offerings of securities, second lien notes, tender offers, exchange...

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Associate

Jacob R. Adams is a business law associate in Foley & Lardner LLP's Boston office and a member of the firm’s Finance Practice.

Prior to joining Foley, Jacob worked as associate counsel, assistant vice president of State Street Corporation where he managed, drafted, and executed filings with the SEC and NYSE including registration statements, correspondence, supplements, Forms 8K, 10K, N-CSR, N-PX, proxy statements, information statements, tender offers and fidelity bonds. He advised clients including investment fund complexes, ETFs, and business development companies. Before that, he worked as a sole practitioner and provided legal advice to businesses and non-profit entities on all aspects of business and commercial law including corporate finance, corporate governance, intellectual property, securities regulation, alternative finance and consumer law matters.

Jacob also served as a legal intern at Iron Mountain Information Management and was a judicial intern to the Hon. Robert Rufo of the Massachusetts Superior Court. Jacob also coaches alternative dispute resolution moot court teams for the National Law School of India University. 

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