To date, the federal government has created several new programs to help businesses weather the economic fallout of the COVID-19 pandemic and the resulting stay-at-home orders and loss of business. These measures include the Paycheck Protection Program (PPP), an expansion of the Economic Injury Disaster (EID) Loan program, SBA loan payment holidays and payroll tax deferral and credits. Today, the Federal Reserve announced a number of programs for financing businesses and state and local governments, including one that will be of interest to many businesses.
SSEG is currently focusing on the new Main Street Business Lending Program, which is intended primarily for mid-market companies (500-10,000 employees), but is available for businesses with less than 500 employees. Although nothing formal has been published, statements from the Fed and Treasury Secretary Mnuchin indicate the program will have the following features:
- The loans would be geared toward businesses with up to 10,000 employees and less than $2.5 billion in revenues for 2019.
- Principal and interest payments will be deferred for a year.
- The loans would be a minimum of $1 million and a maximum of either $25 million or a calculated amount roughly equal to 4x 2019 EBITDA less existing debt, whatever is less
- Terms would include an interest rate of approximately 2.5-4.0%
- The loans would have a four-year maturity.
- The lending process will work through banks and is intended to be streamlined, but we note that some banks have been asking for more information than the SBA required for the PPP loans, and banks are still trying to process all of the PPP loan applications received.
- Companies that take advantage of the program “must commit to make reasonable efforts to maintain payroll and retain workers,” per a Fed statement.
SSEG will provide more information as it becomes available.