On April 9, 2020, the Federal Reserve published new lending opportunities, essentially placing an additional $2.3 trillion into the economy as another answer to the COVID-19 pandemic under Section 13(3) of the Federal Reserve Act. The Main Street lending program, one of the new opportunities, provides $600 billion to small and medium-sized businesses that make reasonable efforts to keep employees on the payroll.

Some of Main Street’s provisions include financing four-year loans to eligible businesses. The principal and interest payments will be deferred for a year, and the loans will be issued through eligible banks. The eligible bank will retain 5% of the loan while selling remaining 95% to the Main Street facility. The Main Street facility will purchase up to $600 billion of the loans.

Eligible borrowers must follow compensation, stock repurchase, and dividend restrictions that have been established in the CARES Act (see below). Borrowers that have been approved of the Small Business Association’s Paycheck Protection Program are still eligible for the Main Street loans.


The Federal Reserve states that eligible lenders are U.S. insured depository institutions, U.S. bank holding companies, and U.S. savings and loan holding companies. They define eligible borrowers as businesses with up to 10,000 employees or up to $2.5 billion in 2019 annual revenues. Each eligible borrower must be a business that is created or organized in the U.S. or under the laws of the U.S. with significant operations in and a majority of its employees based in the U.S.

The Federal Reserve defines an eligible loan as an unsecured term loan made by an eligible lender to an eligible borrower that was originated on or after April 8, 2020, and the loan must have the following details:

  • 4 year maturity;
  • Amortization of principal and interest deferred for one year;
  • Adjustable rate of SOFR + 250-400 basis points;
  • Minimum loan size of $1 million;
  • Maximum loan size that is the lesser of 1) $25 million or 2) an amount that, when added to the eligible borrower’s existing outstanding and committed but undrawn debt, does not exceed four times the eligible borrower’s 2019 earnings before interest, taxes, depreciation, and amortization (EBITDA); and
  • Prepayment permitted without penalty.

Along with the aforementioned details, each loan must have the following attestations:

  • The Eligible Lender must attest that the proceeds of the Eligible Loan will not be used to repay or refinance pre-existing loans or lines of credit made by the Eligible Lender to the Eligible Borrower.
  • The Eligible Borrower must commit to refrain from using the proceeds of the Eligible Loan to repay other loan balances. The Eligible Borrower must commit to refrain from repaying other debt of equal or lower priority, with the exception of mandatory principal payments, unless the Eligible Borrower has first repaid the Eligible Loan in full.
  • The Eligible Lender must attest that it will not cancel or reduce any existing lines of credit outstanding to the Eligible Borrower. The Eligible Borrower must attest that it will not seek to cancel or reduce any of its outstanding lines of credit with the Eligible Lender or any other lender.
  • The Eligible Borrower must attest that it requires financing due to the exigent circumstances presented by the coronavirus disease 2019 (“COVID-19”) pandemic, and that, using the proceeds of the Eligible Loan, it will make reasonable efforts to maintain its payroll and retain its employees during the term of the Eligible Loan.
  • The Eligible Borrower must attest that it meets the EBITDA leverage condition stated in section 5(ii) of the paragraph above specifying required features of Eligible Loans.
  • The Eligible Borrower must attest that it will follow compensation, stock repurchase, and capital distribution restrictions that apply to direct loan programs under section 4003(c)(3)(A)(ii) of the CARES Act.
  • Eligible Lenders and Eligible Borrowers will each be required to certify that the entity is eligible to participate in the Facility, including in light of the conflicts of interest prohibition in section 4019(b) of the CARES Act.

Closing Remarks

It is important to note that although the CARES Act is in effect, many lenders are still awaiting final regulatory oversight from the government. If you have questions about any of the CARES Act’s loans, one of our attorneys can assist you. Please do not hesitate to contact the Wladis Law Firm. We will do our best to provide you with updates and will be available to answer questions as circumstances change. We may be reached at (315) 445-1700 or by e-mailing Attorney Jennifer Huse Granzow at jgranzow@wladislawfirm.com or by reaching out to your everyday firm contacts.