COVID-19 UPDATE: CARES Act Provides Boost to Main Street Lending Program to Aid Small and Mid-Sized Businesses

by Mike DeBlasi | April 16, 2020 1:31 pm

The U.S. Treasury Department and the Federal Reserve announced additional actions to provide up to $2.3 trillion in loans to support the economy, according to a press release[1] issued on April 9, 2020.  One of these measures includes funding for the Main Street Lending Program[2] which aims to ensure credit flows to small and mid-sized businesses impacted by the Coronavirus with the purchase of up to $600 billion in loans.

According to the Federal Reserve: “The Main Street Lending Program will enhance support for small and mid-sized businesses that were in good financial standing before the crisis by offering 4-year loans to companies employing up to 10,000 workers or with revenues of less than $2.5 billion. Principal and interest payments will be deferred for one year. Eligible banks may originate new Main Street loans or use Main Street loans to increase the size of existing loans to businesses. Banks will retain a 5 percent share, selling the remaining 95 percent to the Main Street facility, which will purchase up to $600 billion of loans. Firms seeking Main Street loans must commit to making reasonable efforts to maintain payroll and retain workers. Borrowers must also follow compensation, stock repurchase, and dividend restrictions that apply to direct loan programs under the CARES Act[3]. Firms that have taken advantage of the Paycheck Protection Program (PPP)[4] may also take out Main Street loans.”

The Program consists of two facilities: the Main Street New Loan Facility (the “New Loan Facility”) and the Main Street Expanded Loan Facility (the “Expanded Loan Facility”).  Both will be funded through a single common special purpose vehicle (“SPV”). The SPV will be funded initially through a $75 billion equity investment by the Treasury Department, and the Federal Reserve will provide loans to the SPV.

Under the Program, “Eligible Lenders” are any U.S. insured depository institution, bank holding company or US savings and loan holding company.  “Eligible Borrowers” are businesses that have up to 10,000 employees or $2.5 billion in annual revenues, are organized in the U.S., and have significant operations and a majority of employees in the U.S. as well.

While the loan terms may not be quite as favorable as those under the popular PPP, they are still advantageous and worth considering, especially since a Main Street loan may be used in conjunction with a PPP loan.  Much like a PPP loan, borrowers will need to make certain certifications as part of the application process, including the need for an Eligible Loan as a result of the impact of the COVID-19 pandemic, and that it will make reasonable efforts to maintain payroll and retain employees, among other things.

The Treasury Department is expected to release additional details and the application form in the near future.  We will update this post as soon as more guidance is available.  For general information about the CARES Act and other assistance for small businesses, visit the Treasury Department’s webpage[5].

  1. press release:
  2. Main Street Lending Program:
  3. CARES Act:
  4. Paycheck Protection Program (PPP):
  5. webpage:

Source URL: