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On April 9, the Treasury Department and Federal Reserve released details about the new $600 billion Main Street Lending Program, which is designed to help shore up the economy. The program will be implemented using funds appropriated under the CARES Act and will permit small and medium-sized businesses to obtain financing through eligible lenders.

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The Main Street Lending Program offers two new loan facilities: the Main Street New Loan Facility (MSNLF) for new term loans and the Main Street Expanded Loan Facility (MSELF) to increase the size of existing term loans originated before April 8, 2020. The MSNLF is geared toward smaller businesses, while the MSELF provides for larger loans. The goal of both facilities is to provide access to additional financing options to small and mid-sized companies that were in good financial standing before the COVID-19 crisis. Companies that took advantage of the Payroll Protection Program (PPP) may also receive Main Street loans, but companies may not access both the MSNLF and the MSELF. Unlike loans extended under the PPP, Main Street loans are not forgivable.

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Companies with up to 10,000 employees or less than $2.5 billion in 2019 annual revenue that meet the additional requirements set forth below are eligible for loans under the Main Street Lending Program. Contrary to the terms of the PPP, affiliates of the potential borrower will not be considered in the eligibility determination and how applicants must count their employees. A minimum size requirement (for instance, over 500 employees) is not currently contemplated. To be eligible, a borrower:

The terms of all Main Street loans (under the MNSLF and MSELF) are:

Additionally, new loans extended under the MSNLF will be unsecured, while expanded loans extended under the MSELF will be secured by the same collateral securing the existing facility on a pro rata basis.

Note that undrawn bank debt must be included in the calculation of debt and that EBITDA is likely to be a straight calculation without any add-backs.

Borrowers will be required to certify the following under both the MSNLF and MSELF:

Further details on obtaining, completing and/or submitting applications for loans under the Main Street Lending Program have not been released. Main Street loans will be issued until September 30, 2020, unless the program is oversubscribed earlier or extended. The Federal Reserve is soliciting comments from various stakeholders regarding the program’s intended effectiveness and utility until April&nbsp;16, so there may be adjustments as a result of those comments. As loans under the Main Street Lending Program will likely be made on a first-come, first-served basis, businesses should consider starting a conversation now with their existing lenders, pending the release of further guidance. When applying, companies should be mindful of existing debt agreements, as well as provisions within their governance documents, shareholder agreements or other key contracts that may restrict their ability to borrow funds.

Katherine D. Brandt 216.566.5760 212.344.5680 <a href="mailto:Katherine.Brandt@ThompsonHine.com">Katherine.Brandt@ThompsonHine.com</a>

Tarnetta Jones 212.908.3990 <a href="mailto:Tarnetta.Jones@ThompsonHine.com">Tarnetta.Jones@ThompsonHine.com</a>

Emma Off 513.352.6548 <a href="mailto:Emma.Off@ThompsonHine.com">Emma.Off@ThompsonHine.com</a>

Additional Resources

We have assembled a firmwide multidisciplinary task force to address clients’ business and legal concerns and needs related to the COVID-19 pandemic. Please see our <a href="https://www.thompsonhine.com/services/covid-19-task-force" target="_blank" rel="noopener">COVID-19 Task Force</a> page for additional information and resources.

This advisory bulletin may be reproduced, in whole or in part, with the prior permission of Thompson Hine LLP and acknowledgment of its source and copyright. This publication is intended to inform clients about legal matters of current interest. It is not intended as legal advice. Readers should not act upon the information contained in it without professional counsel. This document may be considered attorney advertising in some jurisdictions.

https://admin.thompsonhinestaging.contentpilot.net/wp-content/uploads/2022/04/COVID-19_Update_-_Main_Street_Lending_Program_-_New_Relief_for_Small_to_Mid-Sized_Businesses.pdf

Main Street Lending Program: New Relief for Small to Mid-Sized Businesses

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