4Thought Blog

The Federal Reserve on April 9 announced a new $600 billion loan program for midsize businesses called the Main Street Business Lending Program.

This loan is meant to help businesses impacted by the COVID-19 pandemic.

The Paycheck Protection Program provides small businesses with loans meant to help support payroll during the period February 15, 2020 through June 30, 2020 if they maintain their employees during this emergency.

The Economic Injury Disaster Loan is an expansion of the U.S. Small Business Administration’s existing disaster loan program. Loans can be used to pay fixed debts, payroll, accounts payable and other bills that can’t be paid due to the disaster’s impact.

U.S. companies employing up to 10,000 workers or with revenues of less than $2.5 billion.

Small employers with 500 employees or fewer, certain nonprofits, self-employed individuals, and independent contractors.

The business eligibility requirements are the same as for the Paycheck Protection Program.

A minimum of $1 million and a maximum of $25 million*.

*subject to limitations

The loan can be up to 2.5 times the borrower’s average monthly payroll costs with a $10 million maximum.

Up to $2 million. There’s also a loan advance available of $10,000 that doesn’t need to be repaid. The loan advance will be made available within days of the application.

Loan
Terms

Up to 4 years, with principal and interest payments deferred for the first year. Then terms would see an adjustable interest rate equal to the Fed’s Secure Overnight Financing Rate, currently 0.01%, plus 250-400 basis points.

If the employer maintains employees and salaries, the portion of the loan used during the 8 weeks after receipt of loan for payroll costs, interest on mortgage obligations, rent, and utilities will be partially or totally forgiven. For any amount not forgiven, the loan term will be 2 years and will accrue interest at a rate of 1%.

Up to 30 years with interest rates of 3.75% for businesses and 2.75% for nonprofits.

- Firms seeking Main Street loans must commit to “make reasonable efforts to maintain payroll and retain workers,” the Fed said.

- Cannot use proceeds to refinance or repay existing debt.

- Firms that have taken advantage of the Paycheck Protection Program may also take out Main Street loans.

- Congress is discussing allocating more funds for the program.

- No more than 25% of the forgiveness amount may be for non-payroll costs.

- Get more details on the PPP loans and forgiveness rules in our in our previous article.

- Businesses can apply for both EIDL and PPP loans but for different expenses (no double dipping)

- Businesses with existing relationship with an SBA Express Lender seeking an EIDL can also apply for an Express Bridge Loan Pilot Program of up to $25,000 for additional fast funding. More information can be found here.

Through any FDIC bank - check with your banker to see if they are offering these loans.

Contact your banker. If your banker is not able to issue the loan, check out this list to find a qualified lender.

Directly on the SBA’s website.