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Federal Reserve Releases Details on Main Street New Loan Facility

The Federal Reserve released details on the Main Street New Loan Facility (the “Facility”) today. The Facility is intended to facilitate lending to small and medium-sized businesses that are not eligible for the SBA Paycheck Protection Program.

Eligible Borrowers: Businesses with up to 10,000 employees or $2.5 billion in 2019 annual revenues that are U.S. based or have significant operations and the majority of its employees in the U.S.

Eligible Lenders: Eligible Lenders are U.S. insured depository institutions, U.S. bank holding companies, and U.S. savings and loan holding companies.

Certifications: Borrower must attest, among other things, that, beginning on the date of origination of the loan and until 12 months following the date on which the loan is not outstanding, it will:

  • Not repurchase an equity security listed on the national securities exchange of the business or its parent, except to the extent required under a contractual obligation in place prior to March 27, 2020;

  • Not pay dividends or make other capital distributions with respect to common stock; and

  • Not increase the total compensation of officers and employees who had a total compensation of over $425,000 in 2019. For officers and employees that who had a total compensation of over $3 million in 2019, their total compensation is capped at the sum of (i) $3 million and (b) 50% of the excess over $3 million of the total compensation received by the officer or employee in 2019. Total compensation includes salary, bonuses, awards of stock, and other financial benefits.

Loan Features:

  • Maturity: 4 years

  • Deferral: Amortization of principal and interest deferred for one year

  • Rate: Adjustable rate of SOFR + 250-400 basis points

  • Minimum loan size: $1 million

  • Maximum loan size: The lesser of (i) $25 million or (ii) an amount that, when added to the Eligible Borrower’s existing outstanding and committed but undrawn debt, does not exceed 4x EBITDA.

  • Prepayment: Allowed without penalty

  • Use of Proceeds: Cannot be used to repay other loan balances

Participations: A Federal Reserve Bank will purchase 95% participations in eligible loans from eligible lenders. Lenders will retain 5% of each eligible loan.

The full release is here.

© Polsinelli PC, Polsinelli LLP in California

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About this Author

Joseph Aaker, Polsinelli Law Firm, Kansas City, Finance Law Attorney
Counsel

Joe Aaker focuses his practice on commercial and asset-based lending transactions, securitization and other structured finance transactions. Joe has a wide range of experience in financial products and markets transactions and regulatory advice. He has represented sell side and buy side clients in complex financial transactions, including structured finance, over-the-counter derivatives, cleared derivatives and securities.

Joe was previously an assistant general counsel at a large investment bank where he: 

  • ...

816-360-4180
Sara C. Ainsworth Securities & Corporate Finance Attorney Polsinelli Washington, D.C.
Associate

As an associate in the Securities & Corporate Finance practice, clients rely on Sara Ainsworth to work with Polsinelli’s team of attorneys to analyze each transaction matter to develop a strategic approach to representation based on the client’s immediate and long-term business and operational goals.

Working closely with seasoned Polsinelli attorneys in the Securities & Corporate Finance practice, Sara helps deliver a range of legal services during the life cycle of the client’s business—from selecting the appropriate choice of entity through to exit strategy.  Her practice focuses on:

  • Planning and executing capital-raising transactions
  • Drafting and negotiating key commercial agreements
  • Money service business and banking applications and registrations
  • Mergers and acquisitions and other strategic transactions
  • Fund formation, including regulated funds such as Small Business Investment Companies

Sara supports clients in a variety of industries, including the financial technology and mobility industries. Collaborating with attorneys from other related practices allows Sara and the entire attorney team to provide clients with comprehensive legal advice designed to minimize liability, maintain flexibility, and advance the client’s objectives.

202.772.8495
Phil Feigen of the Polsinelli Law Firm Corporate Transaction Attorney, in Washington DC
Office Managing Partner

Phil Feigen brings a unique perspective to providing general corporate advice, as well as complex business counsel to clients in ever-changing regulatory environments.  For more than 20 years, Phil has been providing guidance with respect to Small Business Investment Companies and other Small Business Administrative regulations, federal and state banking laws and federal securities laws. 

Phil focuses on helping clients through the SBIC licensing process so that they may realize the benefits of the program and increase the amount of investment...

202-626-8330
Kraig Kohring, Polsinelli Law Firm, Kansas City, Real Estate and Finance Law Attorney
Shareholder

Kraig Kohring’s clients benefit from his strong background in financial services. As chair of the Real Estate and Financial Services Department and group chair for the Capital Markets & Commercial Lending practice, Kraig focuses his personal practice on commercial and asset-based lending transactions, securitization and other structured finance transactions, tax credit finance and related transactions, and commercial loan enforcement. A primary area of his practice includes representing lenders in asset-based credit facilities. He represents national lenders and...

816-360-4163