Last week, the Federal Reserve announced a significant measure aimed at supporting businesses grappling with the economic fallout from the ongoing Covid-19 pandemic: the Main Street Lending Program (MSLP). This initiative targets larger companies, complementing the Small Business Administration’s (SBA) Paycheck Protection Program (PPP) by offering a distinct avenue of financial assistance during these turbulent times.
Unlike the PPP, which primarily caters to small businesses with fewer than 500 employees, the MSLP is designed for companies with up to 15,000 employees or up to $5 billion in annual revenue. This broader scope allows medium-sized enterprises, which often play a crucial role in employment and economic stability, to access vital funding. Eligibility for the MSLP hinges on several factors, including adherence to specific employee retention guidelines and restrictions on dividends and share repurchases.
For businesses already benefiting from a PPP loan, considering additional support through an MSLP loan could be advantageous. While the PPP primarily targets maintaining payroll and covering immediate operational expenses, the MSLP provides more flexible financing options tailored to medium-sized businesses. This includes both new loans and expanded credit under existing agreements, thereby accommodating varying financial needs as the economic landscape continues to evolve.
The MSLP loans are structured as five-year term loans, with principal and interest payments deferred for the first two years, providing crucial breathing room for businesses to recover and stabilize. Interest rates are set at LIBOR (1 or 3 month) plus 300 basis points, ensuring a competitive borrowing cost relative to market conditions.
Navigating the complex terrain of economic recovery necessitates thoughtful consideration of available financial lifelines. For businesses navigating the challenges brought on by the slowly recovering economy, the Main Street Lending Program represents a strategic opportunity to secure additional liquidity and mitigate financial strain. By leveraging these resources, businesses can bolster their resilience, protect jobs, and sustain operations through these unprecedented times.