This article was updated on July 23, 2020. Further updates will be made as new information becomes available.
Schneider Downs continues to track the evolving landscape of federal financial programs offered in the wake of the business disruption caused by the COVID-19 pandemic.
On July 17, the Federal Reserve announced that it would modify the Main Street Lending Program (Main Street) to allow greater access to credit for not-for-profit organizations (i.e., tax-exempt organizations as described in Section 501(c)(3) or 501(c)(19) of the Internal Revenue Code) that were in sound financial condition prior to the pandemic.
The two Main Street loan options for not-for-profit organizations have updated terms, as summarized below (changes from the prior not-for-profit proposal released for comment in mid-June are in italics):
New Main Street Loans
for
Not-for-Profits
Expanded Main Street Loans
for
Not-for-Profits
Term
Five years
Minimum Loan Size
$250,000
$10,000,000
Endowment Cap
$3 billion
Years in Operation
At least five years
Eligibility Criteria
Minimum employees – 10 (previously 50)
Total non-donation revenues equal to or greater than 60% of expenses for the period 2017-2019 (previously 70% of expenses)
2019 operating margin of 2% or more (previously 5%)
Current days of cash on hand – 60 days (previously 90 days)
Current debt repayment capacity–ratio of cash, investments and other resources to outstanding debt and certain other liabilities–of greater than 55% (previously 65%)
Maximum Loan Size
Lesser of $35M or the borrower’s average 2019 quarterly revenue
Lesser of $300M or the borrower’s average 2019 quarterly revenue
Risk Retention
5%
Principal Payment
Principal deferred two years, years 3-5: 15%, 15%, 70%
Interest Payments
Deferred one year
Rate
LIBOR + 3%
If you have other questions regarding the Main Street program, reach out first to your bank and other lenders to see if you can apply for Main Street funding through them. If you need more information, please reach out to any of your connections at Schneider Downs or contact Joel Rosenthal at [email protected].
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