Comparison of the Main Street Lending Program and the Paycheck Protection Program

The Federal Reserve provided details of its Main Street Lending Program on April 9, 2020. The Main Street Lending Program may be an alternative for businesses that are unable to apply for Paycheck Protection Program loans due to ineligibility or otherwise. In addition, those who apply for Paycheck Protection Program loans may also apply for and receive loans through the Main Street Lending Program. The following chart highlights some of the key differences between the Paycheck Protection Program and the Main Street Lending Program.
 

Program	Paycheck Protection Program	Main Street Lending Program
Eligibility	Applicants must have 500 or less employees (with certain exceptions)	Applicants must have no more than 10,000 employees or must have revenues of less than $2.5 billion
Form of Assistance	New loan	(a) New loan or (b) an upsized tranche of a loan made before April 8, 2020
Loan Term	2 years	4 years
Loan Amount	No minimum loan size Maximum loan size = the lesser of: $10 million, and 2.5X average monthly payroll	Minimum loan size of $1 million New loans: Maximum loan size = the lesser of: $25 million, and An amount that, when added to the Borrower’s existing outstanding and committed but undrawn debt = 4X EBITDA Loans existing before April 8, 2020: Maximum loan size  = the least of: $150 million, 30% of borrower’s existing outstanding and committed but undrawn debt, and An amount that, when added to the Borrower’s existing outstanding and committed but undrawn debt = 6X EBITDA
Interest Rate	1%	Interest rate = SOFR + 2.5% to 4% FED SOFR
Loan Fees	All fees paid by SBA to lender = 5%, 3% or 1% of loan amount, depending on loan size	Lender pays facility fee to the government SPV = 100 bp of principal (may require Borrower to pay this fee) Borrower pays origination fee to lender = 100 bp of principal Government SPV pays servicing fee to lender = 25 bp of principal
Payment Deferral	Principal and interest payments deferred 6-12 months	Principal and interest payments deferred 12 months
Forgiveness	Up to 100% of principal forgivable	Loans are not forgivable
Employment and Payroll Requirements	Direct correlation between (a) percentage of payroll and workers retained, and (b) loan forgiveness	Must commit to make reasonable efforts to maintain payroll and retain workers
Compensation Limitations	None	Compensation and severance caps on employees and officers making over $425,000 in 2019 Compensation and severance caps on officers making over $3 million in 2019
Stock Repurchase Limitations	None	Other than due to an existing contractual obligation, may not purchase exchange-listed securities of the borrower or a parent company until 1 year after the loan is repaid
Capital Distribution Limitations	None	May not pay dividends or make distributions until 1 year after the loan is repaid

 
More guidance will be provided by the Federal Reserve in the coming days. Be sure to check the COVID-19 Resource Center for updates.

This publication is intended for general information purposes only and does not and is not intended to constitute legal advice. The reader should consult with legal counsel to determine how laws or decisions discussed herein apply to the reader’s specific circumstances.