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Quick FAQs

Purpose and Design

1Why is the Federal Reserve establishing the Program?

The spread of COVID-19 has harmed communities and substantially disrupted economic activity in many sectors of the economy. In general, the availability of credit has contracted for small and medium-sized businesses while, at the same time, the disruptions to economic activity have heightened the need for such companies to obtain financing. Small and medium-sized businesses are integral to the U.S. economy and create jobs for a large share of the U.S. workforce.

Main Street is designed to provide support to small and medium-sized businesses and their employees across the United States during the current period of financial strain by supporting the provision of credit to such businesses. The availability of additional credit is intended to help companies that were in sound financial condition prior to the onset of the COVID-19 pandemic maintain their operations and payroll until conditions normalize.

2How is the Department of the Treasury supporting the Program?

The Department of the Treasury (Treasury Department) will make a $75 billion equity investment in a Special Purpose Vehicle (Main Street SPV) in connection with the Program. The funds invested by the Treasury Department were appropriated to the Exchange Stabilization Fund under section 4027 of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act).

3Are loans that are originated or upsized in connection with the Program forgivable?

No. Main Street loans are full-recourse loans and are not forgivable. Under section 4003(d)(3) of the CARES Act, the principal amount of a Main Street loan cannot be reduced through loan forgiveness.

4What are the differences between the MSNLF, the MSPLF, and the MSELF?

Main Street includes three facilities that lend to for-profit businesses, each of which was authorized by the Board of Governors of the Federal Reserve System (Board) under section 13(3) of the Federal Reserve Act. All three facilities use the same Eligible Lender and Eligible Borrower criteria, and have many of the same features, including the same maturity, interest rate, deferral of principal for two years, deferral of interest for one year, and ability of the borrower to prepay without penalty. Other features of the loans extended in connection with each facility differ. The loan types also differ in how they interact with the Eligible Borrower’s existing outstanding debt, including with respect to the level of pre-crisis indebtedness an Eligible Borrower may have incurred.

• MSNLF: Eligible Lenders extend new five-year term loans to Eligible Borrowers ranging in size from $100,000 to $35 million. The maximum size of a loan made in connection with the MSNLF cannot, when added to the Eligible Borrower’s existing outstanding and undrawn available debt, exceed four times the Eligible Borrower’s adjusted 2019 earnings before interest, taxes, depreciation, and amortization (EBITDA). The loans must not be, at the time of origination or at any time during the term of the Eligible Loan, contractually subordinated in terms of priority to any of the Eligible Borrower’s other loans or debt instruments. The unique features of loans originated in connection with the MSNLF (MSNLF Loans) are provided in the MSNLF term sheet.

• MSPLF: Eligible Lenders extend new five-year term loans to Eligible Borrowers ranging in size from $100,000 to $50 million. The maximum size of a loan made in connection with the MSPLF cannot, when added to the Eligible Borrower’s existing outstanding and undrawn available debt, exceed six times the Eligible Borrower’s adjusted 2019 EBITDA. At the time of origination and at all times thereafter, the Eligible Loan must be senior to or pari passu with, in terms of priority and security, the Eligible Borrower’s other loans or debt instruments, other than mortgage debt. Eligible Borrowers may, at the time of origination of the loan, refinance existing debt owed by the Eligible Borrower to a lender that is not the Eligible Lender. The unique features of loans originated in connection with the MSPLF (MSPLF Loans) are provided in the MSPLF term sheet.

• MSELF: Eligible Lenders increase (or “upsize”) an Eligible Borrower’s existing term loan or revolving credit facility. The upsized tranche is a five-year term loan ranging in size from $10 million to $300 million. The maximum size of a loan made in connection with the MSELF cannot, when added to the Eligible Borrower’s existing outstanding and undrawn available debt, exceed six times the Eligible Borrower’s adjusted 2019 EBITDA. At the time of upsizing and at all times thereafter, the upsized tranche must be senior to or pari passu with, in terms of priority and security, the Eligible Borrower’s other loans or debt instruments, other than mortgage debt. The features associated with tranches of loans that are upsized in connection with the MSELF (MSELF Upsized Tranches) are outlined in the MSELF term sheet.

5How long will the Program be in effect?

The Program was established to respond to uncertainty related to the COVID-19 pandemic and is authorized to purchase participations in MSNLF Loans, MSPLF Loans, and MSELF Upsized Tranches until December 31, 2020. The Main Street SPV will cease purchasing loan participations on December 31, 2020, unless the Program is extended by the Board and the
Treasury Department. The FRB Boston will continue to operate the SPV after such date until the Main Street SPV’s assets mature or are sold.

6Is there a limit to the size of the Program?

The Main Street SPV will purchase up to $600 billion of participations in eligible loans. The Federal Reserve and the Treasury Department have assessed this amount to be appropriate in light of the current financial strains facing Eligible Borrowers. The Federal Reserve and the Treasury Department will continue to assess the situation and needs of Eligible Borrowers and may adjust the Program’s size in the future.

7What are the differences between the Program and the Paycheck Protection Program and Primary Market Corporate Credit Facility?

Similar to the Paycheck Protection Program (PPP) and the Primary Market Corporate Credit Facility (PMCCF), Main Street was created to assist companies that have been adversely affected by the COVID-19 pandemic. Each of these programs, however, was developed to provide liquidity to companies of different sizes:

• PPP: The PPP was established by the CARES Act and implemented by the Small Business Administration (SBA) to support the payroll and operations of small businesses through the issuance of government-guaranteed loans that include a forgiveness feature for borrowers that satisfy the requirements of the PPP.

• Main Street: The Federal Reserve designed Main Street to support small and medium sized businesses that were unable to access the PPP or that require additional financial support after receiving a PPP loan. Main Street loans are not forgivable.

• PMCCF: The Federal Reserve established the PMCCF to support large companies through the purchase of eligible corporate bonds from, and lending through syndicated loans to, large companies. PMCCF loans are not forgivable.

8What provisions of the CARES Act apply to the Program?

Under section 4003(b)(4) of the CARES Act, the Secretary of the Treasury (Secretary) is authorized to make loans and loan guarantees to, and other investments in, programs or facilities established by the Board for the purpose of providing liquidity to the financial system that supports lending to eligible businesses, states, or municipalities. The Secretary has
committed $75 billion of the funds appropriated under Title IV of the CARES Act in the Main Street SPV in support of the Program. The following restrictions of the CARES Act have been incorporated into the design of the Program:

• Eligible Business Definition: Section 4002(4) of the CARES Act prevents a business from participating in the Program if it has “otherwise received adequate economic relief in the form of loans or loan guarantees provided under [the Coronavirus Economic Stabilization Act of 2020 (Subtitle A of Title IV of the CARES Act)].” Consistent with this restriction, businesses that are receiving “specific support” pursuant to section 4003(b)(1)-(3) are not eligible for the Program

• Direct Loans: Eligible Borrowers must commit to comply with the restrictions that apply to direct loan programs under section 4003(c)(3)(A)(ii) of the CARES Act, except that an S corporation or other tax pass-through entity that is an Eligible Borrower may make distributions to the extent reasonably required to cover its owners’ tax obligations in respect of the entity’s earnings.


• U.S. Business Requirement: Under section 4003(c)(3)(C) of the CARES Act, Eligible Borrowers must be “businesses that are created or organized in the United States or under the laws of the United States and that have significant operations in and a majority of its employees based in the United States.”


• Loan Forgiveness Prohibition: Under section 4003(d)(3), the principal amount of the portion of any MSNLF Loan, MSPLF Loan, or MSELF Upsized Tranche that is participated to the Main Street SPV cannot be reduced through loan forgiveness. 

• Conflicts of Interest: Under section 4019 of the CARES Act, Eligible Lenders and Eligible Borrowers will be required to certify that no “Covered Individual” owns, controls, or holds 20% or more (by vote or value) of any class of equity ownership interest in the business. “Covered Individuals” include the President, the Vice President, the head of any Executive Department, any Member of Congress, and certain immediate family members of the foregoing.

9What are the conflicts of interest provisions of the CARES Act?

Section 4019 of the CARES Act prohibits entities in which certain government officials (list here) and some of their immediate family members have a “controlling interest” from participating in certain government programs, including Main Street. Each participating entity, both Eligible Lenders and Eligible Borrowers, will be required to certify that the entity is not a “covered entity” as defined in section 4019 of the CARES Act. Detailed instructions are provided in the Lender Registration Certifications and Covenants and the MSNLF, MSPLF, and MSELF Borrower Certifications and Covenants.

10Can the principal amount of loans extended under Main Street be reduced?

Main Street is not a grant program and is subject to the prohibition on loan forgiveness in section 4003(d)(3) of the CARES Act. In the event of restructurings or workouts, the Main Street SPV may agree to reductions in interest (including capitalized interest), extended amortization schedules and maturities, and higher priority “priming” loans.

MSNLF Loans

1How does the MSNLF work?

Eligible Lenders may extend a new MSNLF Loan to an Eligible Borrower and sell a 95% participation in that MSNLF Loan to the Main Street SPV at par value. All such sales will be structured as “true sales” and must be completed expeditiously after the origination of the MSNLF Loan. The Eligible Lender must retain 5% of the MSNLF Loan until it matures or neither the Main Street SPV nor a Governmental Assignee holds an interest in MSNLF Loan in any capacity, whichever comes first. The Main Street SPV and the Eligible Lender would share in any losses on the MSNLF Loan on a pari passu basis. The Eligible Borrower must have been in sound financial condition prior to the onset of the COVID-19 pandemic. In order for an Eligible Borrower to receive an MSNLF Loan, any existing loan it had outstanding with the Eligible Lender as of December 31, 2019, must have had an internal risk rating (based on the Eligible Lender’s risk rating system) that was equivalent to a “pass” in the Federal Financial Institutions Examination Council’s (FFIEC) supervisory rating system as of that date.

2What are the terms of MSNLF Loans?

The MSNLF term sheet is available on the Board’s Main Street page. More information will be made available on that page regarding loan participation terms, credit administration, and loan servicing.

3What is the effect of the requirement that MSNLF Loans not be “contractually subordinated in terms of priority” to other loans or debt instruments?

An MSNLF Loan, at the time of origination or at any time during its term, may not be contractually subordinated in terms of priority to the Eligible Borrower’s other loans or debt instruments. This means that an MSNLF Loan may not be junior in priority in bankruptcy to the Eligible Borrower’s other unsecured loans or debt instruments. This provision does not prevent:

• the issuance of an MSNLF Loan that is a secured loan (including in a second lien or other capacity) to an Eligible Borrower, whether or not the Eligible Borrower has an outstanding secured loan of any lien position or maturity;

(For the avoidance of doubt, prohibitions on contractual subordination with respect to Main Street loans do not
prevent the incurrence of obligations that have mandatory priority under the Bankruptcy Code or other insolvency
laws that apply to entities generally.)

• the issuance of an MSNLF Loan that is an unsecured loan to an Eligible Borrower, regardless of the term or secured or unsecured status of the Eligible Borrower’s existing indebtedness; or

• the Eligible Borrower from taking on new secured or unsecured debt after receiving an MSNLF Loan, provided the new debt would not have higher contractual priority in bankruptcy than the MSNLF Loan.

4Can an Eligible Lender make an MSNLF Loan to a new customer?

Yes. Eligible Lenders should follow their normal policies and procedures for originating a loan to a new customer, including Know Your Customer procedures. In addition, when sizing the amount of the Eligible Loan, the Eligible Lender must require the Eligible Borrower to use an adjusted EBITDA methodology that is based on a methodology that the Eligible Lender has previously required to be used to adjust EBITDA when extending credit to similarly situated borrowers on or before April 24, 2020.

MSPLF Loans

1How does the MSPLF work?

Eligible Lenders may extend a new MSPLF Loan to an Eligible Borrower and sell a 95% participation in that MSPLF Loan to the Main Street SPV at par value. All such sales will be structured as “true sales” and must be completed expeditiously after the origination of the MSPLF Loan. The Eligible Lender must retain 5% of the MSPLF Loan until it matures or
neither the Main Street SPV nor a Governmental Assignee holds an interest in the MSPLF Loan in any capacity, whichever comes first. The Main Street SPV and the Eligible Lender would share in any losses on the MSPLF Loan on a pari passu basis.


The Eligible Borrower must have been in sound financial condition prior to the onset of the COVID-19 pandemic. In order for an Eligible Borrower to receive an MSPLF Loan, any existing loan it had outstanding with the Eligible Lender as of December 31, 2019, must have had an internal risk rating (based on the Eligible Lender’s risk rating system) that was equivalent to a “pass” in the FFIEC’s supervisory rating system as of that date.

2What are the terms of MSPLF Loans?

The MSPLF term sheet is available on the Board’s Main Street page. More information will be made available on that page regarding loan participation terms, credit administration, and loan servicing.

3Can an Eligible Lender make an MSPLF Loan to a new customer?

Yes. Eligible Lenders should follow their normal policies and procedures for originating a loan to a new customer, including Know Your Customer procedures. In addition, when sizing the amount of the Eligible Loan, the Eligible Lender must require the Eligible Borrower to use an adjusted EBITDA methodology that is based on a methodology that the Eligible Lender has previously required to be used to adjust EBITDA when extending credit to similarly situated borrowers on or before April 24, 2020.

4Can an Eligible Borrower use the proceeds of an MSPLF Loan to refinance its existing loans?

At the time of origination of an MSPLF Loan, an Eligible Borrower may use the proceeds of the MSPLF Loan to prepay existing debt that is outstanding and owed to lenders other than the Eligible Lender that originates the MSPLF Loan and the Eligible Lender’s affiliates. In other words, the proceeds of an MSPLF Loan can be used to refinance existing loans owed to other unaffiliated lenders.


After origination and until the MSPLF Loan is repaid in full, the Eligible Borrower must refrain from repaying the principal balance of, or paying any interest on, any debt other than the MSPLF Loan, unless the debt or interest payment is mandatory and due.

5What does it mean for an MSPLF Loan to be “senior to or pari passu with, in terms of priority and security, the Eligible Borrower’s other loans or debt instruments, other than mortgage debt”?

MSPLF Loans must be senior to or pari passu with, in terms of priority and security, the Eligible Borrower’s other Loans or Debt Instruments, other than Mortgage Debt (the MSPLF Priority and Security Requirement). The MSPLF Priority and Security Requirement is designed to prevent MSPLF Loans from being subordinated or otherwise disadvantaged in terms of priority or security in relation to the other Loans or Debt Instruments of the Eligible Borrower, except for Mortgage Debt.

For purposes of the MSPLF Priority and Security Requirement:

• “Loans or Debt Instruments” means debt for borrowed money and all obligations evidenced by bonds, debentures, notes, loan agreements or other similar instruments, and all guarantees of the foregoing.

• “Mortgage Debt” means debt secured only by real property at the time of the MSPLF Loan’s origination; and limited recourse equipment financings (including equipment capital or finance leasing and purchase money equipment loans) secured only by the acquired equipment.

Time of Origination: To comply with the MSPLF Priority and Security Requirement at the time of origination, Eligible Lenders and Eligible Borrowers must apply the following guidance:

(On July 15, 2020, the definition of “mortgage debt” was clarified to reflect that debt secured by real property qualifies as mortgage debt only if it is solely secured by real property. This clarification is intended to be incorporated into the definition of mortgage debt under the MSPLF Borrower Certifications and Covenants and Lender Transaction-Specific Certifications and Covenants. MSPLF Loans extended (i.e., funded or submitted to the Main Street Lender Portal) in good faith on or before July 17, 2020 that do not reflect this clarification are not adversely affected by the clarification.)

• Secured Loans: The MSPLF Loan must be secured if, at the time of origination, the Eligible Borrower has any other secured Loans or Debt Instruments, other than Mortgage Debt.

- Pari Passu or Senior in Priority: The MSPLF Loan must not be contractually subordinated in terms of priority to any of the Eligible Borrower’s other Loans or Debt Instruments.

- Pari Passu or Senior in Security:

• If the MSPLF Loan is secured because the Eligible Borrower has other secured debt that is not Mortgage Debt, then the Collateral Coverage Ratio for the MSPLF Loan at the time of its origination must be either  at least 200% or not less than the aggregate Collateral Coverage Ratio for all of the Borrower’s other secured Loans or Debt Instruments (other than Mortgage Debt).

• “Collateral Coverage Ratio” means the aggregate value of any relevant collateral security, including the pro rata value of any shared collateral, divided by the outstanding aggregate principal amount of the relevant debt.

• If the MSPLF Loan is secured by the same collateral as any of the Eligible Borrower’s other Loans or Debt Instruments (other than Mortgage Debt) because the Eligible Borrower has other secured debt that is not
Mortgage Debt, the lien upon such collateral securing the MSPLF Loan must be and remain senior to or pari passu with the lien(s) of the other creditor(s) upon such collateral. The MSPLF Loan need not share in all of the collateral that secures the Eligible Borrower’s other Loans or Debt Instruments.

• For the avoidance of doubt, if an Eligible Borrower has no other secured debt (other than Mortgage Debt), the Collateral Coverage Ratio and pari passu requirements do not apply to the collateral that secures the MSPLF
Loan.

• Unsecured Loans: The MSPLF Loan can be unsecured only if the Eligible Borrower does not have, as of the date of origination, any secured Loans or Debt Instruments (other than Mortgage Debt). Unsecured MSPLF Loans must not be contractually subordinated in terms of priority to any of the Eligible Borrower’s other unsecured Loans or Debt Instruments.

Life of the Loan: In order to comply with the MSPLF Priority and Security Requirement during the term of the MSPLF Loan after the date of origination, the loan documentation for the MSPLF Loan must:

• ensure that the MSPLF Loan does not become contractually subordinated in terms of priority to any of the Eligible Borrower’s other loans or debt instruments; and

• contain a lien covenant or negative pledge that is of the type – and contains exceptions, limitations, carve-outs, baskets, materiality thresholds, and qualifiers – that are consistent with those used by the Eligible Lender in its ordinary course lending to similarly situated borrowers.

6If an Eligible Borrower is using an MSPLF Loan to refinance debt it owes to a different lender, should that debt be counted in its calculation of “existing outstanding and undrawn available debt”?

No. The outstanding debt of the Eligible Borrower that is being refinanced by an MSPLF Loan should not be included in the calculation of the Eligible Borrower’s “existing outstanding and undrawn available debt.” To the extent that such outstanding debt is only being partially refinanced by the Main Street loan, only the portion that is being refinanced may be excluded from the “existing outstanding and undrawn available debt” calculation. The Eligible Borrower must ensure that all such excluded debt is fully refinanced by the Main Street loan expeditiously.

MSELF Upsized Tranches

1How does the MSELF work?

Eligible Lenders that have extended an existing term loan or revolving credit facility to an Eligible Borrower may increase (or “upsize”) that extension of credit, by adding a new increment (or “tranche”). Eligible Lenders may sell a 95% participation in the MSELF Upsized Tranche to the Main Street SPV at par value. All such sales will be structured as “true sales” and must be completed expeditiously after the upsizing. The Eligible Lender must retain 5% of the MSELF Upsized Tranche until it matures or neither the Main Street SPV nor a Governmental Assignee holds an interest in MSELF Upsized Tranche in any capacity, whichever comes first. The Eligible Lender must also retain its interest in the underlying loan until that loan matures, the MSELF Upsized Tranche matures, or neither the Main Street SPV nor a Governmental Assignee holds an interest in the MSELF Upsized Tranche in any capacity, whichever comes first. The Main Street SPV and the Eligible Lender would share in any losses on the MSELF Upsized Tranche on a pari passu basis. Any collateral that secures the underlying loan must secure the upsized tranche on a pari passu basis.


To be eligible for “upsizing,” the existing term loan or revolving credit facility must have been originated on or before April 24, 2020, and must have a remaining maturity of at least 18 months. The Eligible Lender may extend the maturity of an existing loan or revolving credit facility at the time of upsizing in order for the underlying instrument to satisfy the 18-month remaining maturity requirement.


The Eligible Borrower must have been in sound financial condition prior to the onset of the COVID-19 pandemic. The existing loan or revolving credit facility must have had a risk rating, based on the Eligible Lender’s internal rating system, equivalent to a “pass” in the FFIEC’s supervisory rating system as of December 31, 2019.

2What are the terms of MSELF Upsized Tranches?

The MSELF term sheet is available on the Board’s Main Street page. More information will be made available on that page regarding loan participation terms, credit administration, and loan servicing.

3Under the MSELF, can an Eligible Lender sell a participation in an upsized tranche of a loan that was originated as part of a multi-lender facility?

If the loan underlying an MSELF Upsized Tranche is part of a multi-lender facility, the Eligible Lender must be one of the lenders that holds an interest in the underlying loan at the date of upsizing. Only the Eligible Lender for the MSELF Upsized Tranche is required to meet the Eligible Lender criteria. Other members of the multi-lender facility are not required to be Eligible Lenders.


More than one lender under an existing multi-lender facility may choose to “upsize” the existing facility to originate an MSELF Upsized Tranche. Such MSELF Upsized Tranches should be separately submitted to the SPV for the sale of a participation interest. However, the Eligible Borrower’s aggregate borrowing is constrained by the MSELF maximum loan size tests and, therefore, the Eligible Borrower’s aggregate borrowing cannot exceed $300 million or an amount that, when added to the Eligible Borrower’s existing outstanding and undrawn available debt, exceeds six times the Eligible Borrower’s adjusted 2019 EBITDA.

4Does the Eligible Lender for the MSELF Upsized Tranche need to have been the lender that originated the underlying loan?

No. The Eligible Lender is not required to have been the lender that originally extended the loan underlying an MSELF Upsized Tranche. If the Eligible Lender purchased the interest in the underlying loan as of December 31, 2019, the Eligible Lender must have assigned an internal risk rating to the underlying loan equivalent to a “pass” in the FFIEC’s supervisory rating system as of that date. If the Eligible Lender purchased the interest after December 31, 2019, the Eligible Lender should use the internal risk rating given to that loan at the time of purchase to determine whether the loan is eligible for upsizing under the MSELF. 

The position that an Eligible Lender relies upon to upsize a loan in connection with the MSELF may have been purchased from an Eligible Lender or a non-eligible lender.

5If an existing multi-lender facility loan does not have an “opening” or “accordion” clause, can it still be eligible for upsizing under the MSELF?

Yes. The Eligible Borrower, Eligible Lender(s), and any other required parties must amend the underlying credit agreements as needed to comply with the requirements set out in the MSELF term sheet.

6What requirements exist for the loan underlying an MSELF Upsized Tranche?

The loan underlying an MSELF Upsized Tranche can be a secured or unsecured term loan or revolving credit facility that:

• was made by an Eligible Lender(s) to an Eligible Borrower;

• is currently held, at least in part, by an Eligible Lender;

• was originated on or before April 24, 2020;

• has a remaining maturity of at least 18 months (taking into account any adjustments made to the maturity of the loan after April 24, 2020, including at the time of upsizing); and

• received an internal risk rating equivalent to a “pass” in the FFIEC’s supervisory rating system by the Eligible Lender, as of December 31, 2019.

Any collateral securing the underlying credit facility (at the time of upsizing or on any subsequent date) must secure the MSELF Upsized Tranche on a pari passu basis.3

7Why is the minimum loan size for an MSELF Upsized Tranche $10 million, rather than $100,000 in the MSNLF and the MSPLF?

The MSELF was designed to meet the needs of borrowers with existing loan arrangements, particularly those with larger and more complex existing loans, where pre-existing loan documentation can be used. As a result, the minimum loan size for an MSELF Upsized Tranche is $10 million.


The Federal Reserve recognizes that some aspects of an MSELF Upsized Tranche, such as the potential for a larger loan size associated with the requirement that outstanding and available undrawn debt not exceed six times adjusted EBITDA, may be attractive to Eligible Borrowers seeking a loan below $10 million. The MSPLF offers similar leverage limitations for Eligible Borrowers and has a minimum loan size of $100,000.

The Federal Reserve will continue to evaluate whether the loan amounts allowed under the Program should be adjusted to enhance the Program’s efficacy. Any such adjustments would
be communicated well in advance of their effective date to ensure that Eligible Lenders and Eligible Borrowers are not adversely affected.

(3 For the avoidance of doubt, Eligible Lenders and Eligible Borrowers may not reduce or restructure the underlying
credit facility prior to the origination of the MSELF Upsized Tranche in order to evade the requirement that collateral deemed sufficient by the bank prior to April 24, 2020, be shared on a pari passu basis with the Main Street SPV.)

8Can the Eligible Lender that sells a participation to the Main Street SPV share its 5% retention of the MSELF Upsized Tranche with other members of a multi-lender facility?

No. The Eligible Lender must retain 5% of the MSELF Upsized Tranche, even when the underlying loan is part of a multi-lender facility. The Eligible Lender must retain 5% of the MSELF Upsized Tranche until (A) the MSELF Upsized Tranche matures or (B) neither the Main Street SPV nor a Governmental Assignee holds an interest in the loan in any capacity, whichever occurs first.

9What if no EBITDA methodology was used when originating or amending the loan underlying an MSELF Upsized Tranche?

If the Eligible Borrower’s EBITDA was not calculated or included in the loan documentation or internal risk analysis when originating the loan or revolving credit facility that would underlie an MSELF Upsized Tranche, the Eligible Lender must require the Eligible Borrower to calculate its adjusted EBITDA using a methodology that the Eligible Lender has required to be used in other contexts for the Eligible Borrower or, if there is no such calculation, for similarly situated borrowers.

10How can the “pass” criterion be satisfied if the loan underlying an upsized tranche was originated or purchased by an Eligible Lender after December 31, 2019?

If an existing loan was originated or purchased by an Eligible Lender after December 31, 2019, the Eligible Lender should use the internal risk rating given to that loan at origination or purchase (as applicable) to determine whether the loan satisfies the “pass” criterion for upsizing under the MSELF.

11What does it mean for an MSELF Upsized Tranche to be “senior to or pari passu with, in terms of priority and security, the Eligible Borrower’s other loans or debt instruments, other than mortgage debt”?

MSELF Upsized Tranches must be senior to or pari passu with, in terms of priority and security, the Eligible Borrower’s other Loans or Debt Instruments, other than Mortgage Debt (the MSELF Priority and Security Requirement). The MSELF Priority and Security Requirement is designed to prevent MSELF Upsized Tranches from being subordinated or otherwise disadvantaged in terms of priority or security in relation to the other Loans or Debt Instruments of the Eligible Borrower, except for Mortgage Debt.

For purposes of the MSELF Priority and Security Requirement:

• “Loans or Debt Instruments” means debt for borrowed money and all obligations evidenced by bonds, debentures, notes, loan agreements or other similar instruments, and all guarantees of the foregoing.

• “Mortgage Debt” means debt secured only by real property at the time of the MSELF Upsized Tranche’s origination; 4 and limited recourse equipment financings (including equipment capital or finance leasing and purchase money equipment loans) secured only by the acquired equipment.

Time of Origination: To comply with the MSELF Priority and Security Requirement at the time of origination, Eligible Lenders and Eligible Borrowers must apply the following guidance:

• Secured Loans: The MSELF Upsized Tranche must be secured if, at the time of origination, the Eligible Borrower has any other secured Loans or Debt Instruments, other than Mortgage Debt. The MSELF Upsized Tranche must be secured by the collateral (including, if applicable, any Mortgage Debt) securing any other tranche of the underlying credit facility on a pari passu basis. Eligible Lenders and Eligible Borrowers may add new collateral to secure the loan (including the MSELF Upsized Tranche on a pari passu basis) at the time of upsizing. If the underlying credit facility includes both term loan tranche(s) and revolver tranche(s), the MSELF Upsized Tranche needs to share
collateral on a pari passu basis with the term loan tranche(s) only. Secured MSELF Upsized Tranches must not be contractually subordinated in terms of priority to any of the Eligible Borrower’s other Loans or Debt Instruments.

• Unsecured Loans: The MSELF Upsized Tranche can be unsecured only if the Eligible Borrower does not have, as of the date of origination, any secured Loans or Debt Instruments (other than Mortgage Debt that does not secure any other tranche of the underlying credit facility). Unsecured MSELF Upsized Tranches must not be contractually subordinated in terms of priority to the Eligible Borrower’s other unsecured Loans or Debt Instruments.

Life of the Loan: In order to comply with the MSELF Priority and Security Requirement during the term of the MSELF Upsized Tranche after the date of origination, the loan documentation  for the MSELF Upsized Tranche must:

• ensure that the MSELF Upsized Tranche does not become contractually subordinated in terms of priority to any of the Eligible Borrower’s other Loans or Debt Instruments;

• ensure that the MSELF Upsized Tranche remains secured on a pari passu basis by the collateral securing the underlying credit facility, as described in the “time of origination” section above; and

• contain a lien covenant or negative pledge that is of the type – and contains exceptions, limitations, carve-outs, baskets, materiality thresholds, and qualifiers – that are consistent with those used by the Eligible Lender in its ordinary course lending to similarly situated borrowers.

- With respect to an underlying credit facility that has more than one lender, any lien covenant that was negotiated in good faith prior to April 24, 2020, as part of any underlying MSELF Loan, is sufficient to satisfy this requirement.

(On July 15, 2020, the definition of “mortgage debt” was clarified to reflect that debt secured by real property qualifies as mortgage debt only if it is solely secured by real property. This clarification is intended to be incorporated into the definition of mortgage debt under the MSELF Borrower Certifications and Covenants and Lender Transaction-Specific Certifications and Covenants. MSELF Upsized Tranches extended (i.e., funded or submitted to the Main Street Lender Portal) in good faith on or before July 17, 2020 that do not reflect this clarification are not adversely affected by the clarification.

For the avoidance of doubt, Eligible Lenders and Eligible Borrowers may not create a new term loan tranche in what was solely a revolving credit facility prior to April 24, 2020, in order to evade the requirement that collateral deemed sufficient by the bank prior to April 24, 2020, be shared on a pari passu basis with the Main Street SPV.)

12Is an Eligible Lender required to hold all of its position in the credit facility underlying an MSELF Upsized Tranche for the life of the loan?

After originating an MSELF Upsized Tranche, the Eligible Lender must retain its interest in the credit facility underlying the MSELF Upsized Tranche until the underlying credit facility matures, the MSELF Upsized Tranche matures, or neither the Main Street SPV nor a Governmental Assignee holds an interest in the MSELF Upsized Tranche in any capacity, whichever comes first. This requirement is intended to apply to position(s) that an Eligible Lender holds in the underlying credit facility for investment purposes, and is not intended to extend to the purchase or sale of short-term positions by an Eligible Lender’s trading desk with unaffiliated parties for market-making purposes. In order to be treated as a market-making position under this exemption, the following conditions must be met:

  • the position cannot be the position the Eligible Lender relied upon in order to upsize the loan (i.e., it cannot be an Eligible Lender’s only position in the underlying credit facility);
  • the position must be purchased or sold by a trading desk in a transaction with an unaffiliated party and must be segregated from the position the lender relied upon to upsize the loan; and
  • the position must be held in an available-for-sale capacity in anticipation of reasonably expected near term demand.

If an Eligible Lender comes into possession of additional positions in the underlying credit facility after the upsizing of such facility in connection with the MSELF, it is not required to retain such new positions.

Borrower Eligibility

1Which entities are eligible to borrow under the Program?

To be eligible to borrow under the Program, a Business must satisfy certain eligibility criteria, as set out in the MSNLF, MSPLF, and MSELF term sheets and described further below. The Eligible Borrower criteria are the same across all three facilities that facilitate lending to for profit businesses.

  • The Business must have been established prior to March 13, 2020. The Business must have been formed prior to March 13, 2020, under the laws of the United States, one of the several states, the District of Columbia, any of the territories and possessions of the United States, or an Indian Tribal government.
  • The Business must not be an Ineligible Business. Ineligible Businesses include Businesses listed in 13 CFR 120.110(b)-(j), (m)-(s), as modified and clarified by SBA regulations for purposes of the PPP on or before April 24, 2020. Such modifications and clarifications include the SBA’s recent interim final rules available at 85 Fed. Reg. 20811, 85 Fed. Reg. 21747, and 85 Fed. Reg. 23450 (released by the SBA on April 24, 2020). In addition, as of July 15, 2020, the Federal Reserve has incorporated the SBA’s Interim Final Rules published in the Federal Register on June 18, 2020 (85 Fed. Reg. 36717) and June 26, 2020 (85 Fed. Reg. 38301), which amended the SBA’s earlier Interim Final Rule published in the Federal Register on April 15, 2020 (85 Fed. Reg. 20811). The Federal Reserve may further modify the application of these restrictions to Main Street.
  • The Business must meet at least one of the following two conditions: (a) the Business has 15,000 employees or fewer, or (b) the Business has 2019 annual revenues of $5 billion or less. Businesses must meet at least one of these conditions, but are not required to meet both. To determine how many employees a Business has or a Business’s 2019 revenues, the employees and revenues of the Business must be aggregated with the employees and revenues of its affiliated entities.
  • The Business must be a U.S. Business. Under section 4003(c)(3)(C) of the CARES Act, Eligible Borrowers must be Businesses that were created or organized in the United States or under the laws of the United States with significant operations in and a majority of their employees based in the United States.
  • The Business may only participate in one of the Main Street facilities (MSNLF, MSPLF, MSELF, NONLF, or NOELF) and must not also participate in the PMCCF. An Eligible Borrower may only participate in one of the Main Street facilities: the MSNLF, the MSPLF, the MSELF, the NONLF, or the NOELF. In addition, a Business is not an Eligible Borrower if it participates in the PMCCF.
  • The Business must not have received specific support pursuant to the Coronavirus Economic Stabilization Act of 2020 (Subtitle A of Title IV of the CARES Act). A Business is not eligible if it has received support pursuant to section 4003(b)(1)-(3) of the CARES Act.
  • The Business must be able to make all of the certifications and covenants required under the Program. See the MSNLF, MSPLF, and MSELF Borrower Certifications and Covenants for more information.

Borrowers that satisfy all criteria above may apply to an Eligible Lender for a Main Street loan. In the case of multi-borrower loans, each borrower must meet borrower eligibility criteria. The Eligible Lender is expected to conduct an assessment of each potential borrower’s pre-pandemic financial condition and post-pandemic prospects to determine whether the loan is approved. 

For the avoidance of doubt, a Business that has received PPP loans, or that has affiliates that have received PPP loans, is permitted to borrow under Main Street, provided that the Business is an Eligible Borrower. Borrowers that are not eligible for a Main Street loan should consult the Treasury Department and SBA to determine if they are eligible for other relief programs.

(For the avoidance of doubt, the Eligible Lender may sell down part of its interest in the underlying credit facility before originating the MSELF Upsized Tranche.)

2How is “Business” defined?

Businesses must be legally formed entities that are organized for profit as a partnership; a limited liability company; a corporation; an association; a trust; a cooperative; a joint venture with no more than 49% participation by foreign business entities; a tribal business concern; or a tribal economic enterprise that is separate from the related tribal government, even if not a separate legal entity. 

To be eligible for the Program, a tribal business concern must be either  wholly owned by one or more Indian tribal governments, or by a corporation that is wholly owned by one or more Indian tribal governments, or owned in part by one or more Indian tribal governments, or by a corporation that is wholly owned by one or more Indian tribal governments, if all other owners are either U.S. citizens or Businesses. A tribal business concern must be a separate and distinct legal entity organized or chartered by the tribe, Federal, or state authorities. An Eligible Lender must determine, based on its own due diligence and advice from experienced in-house or outside counsel, that the tribal business either does not have or has effectively waived sovereign immunity such that U.S. federal courts, in addition to any state court as may be agreed, may be among courts of competent jurisdiction for matters resulting from the Main Street loan transaction. Such waiver must extend to the Borrower Certifications and Covenants, Assignment-in-Blank, and Co-Lender Agreement, as each is applicable.

As of July 31, 2020, the Federal Reserve used its discretion to clarify that tribal economic enterprises that do not have a separate legal personality from the related tribal government are “Businesses” and are not “Ineligible Businesses” for purposes of the Program, provided that the following criteria are met:

  • The Eligible Lender must determine that the finances of the tribal economic enterprise are distinguishable from those of the related tribal government, which may be the “borrower” named under the loan documents. To make such a determination, Eligible Lenders should use their customary underwriting processes, which may require separate financial statements, a board and/or management group distinct from the tribal government, or other controls deemed sufficient by the Eligible Lender to establish separateness. Eligible Lenders may also require certifications or other representations regarding the separateness of the tribal economic enterprise and related tribal government.
  • The Business and Eligible Lender must use the financial records of the tribal economic enterprise, and not the records of the tribal government, when applying Program requirements. For example, the financial records of only the tribal economic enterprise should be used for the purpose of determining the Eligible Borrower’s EBITDA and outstanding debt (each, an input to the maximum loan size calculation), as well as for determining the application of the security and priority requirements under the MSPLF
    and MSELF. 
  • Recourse must be available to the assets of the tribal economic enterprise in a manner that is customary for loans made to such enterprises by an Eligible Lender. While the tribal government may be the “borrower” in name, recourse to the assets of the government that are separate from those of the enterprise may be limited in alignment with the Eligible Lender’s typical standards for such lending.
  • An Eligible Lender must determine, based on its own due diligence and advice from experienced in-house or outside counsel, that the tribal economic enterprise either does not have sovereign immunity or the tribe has effectively waived it such that U.S. federal courts, in addition to any state court as may be agreed, may be among courts of competent jurisdiction for matters resulting from the Main Street loan transaction. Such waiver must extend to the Borrower Certifications and Covenants, Assignment-inBlank, and Co-Lender Agreement, as each is applicable.
  • The tribal economic enterprise must meet all other criteria for being an Eligible Borrower.
  • The principal executive officer and principal financial officer of the Business (i.e., the separate tribal economic enterprise) must be signatories to the Borrower certifications.

Other forms of organization may be considered for inclusion as an Eligible Borrower under the Program at the discretion of the Federal Reserve.

3How should a Business count employees for purposes of determining eligibility under the Program?

To be an Eligible Borrower, a Business must meet at least one of the following two conditions:
(a) the Business has 15,000 employees or fewer, or (b) the Business has 2019 annual revenues of $5 billion or less. To determine how many employees a Business has, it should follow the framework set out in the SBA’s regulation at 13 CFR 121.106. As set out in 13 CFR 121.106, the Business should count as employees all full-time, part-time, seasonal, or otherwise employed persons, excluding volunteers and independent contractors. Businesses should count their own employees and those employed by their affiliates. In order to determine the applicable number of employees, Businesses should use the average of the total number of persons employed by the Eligible Borrower and its affiliates for each pay period over the 12 months prior to the origination or upsizing of the Main Street loan.

4How should a Business calculate 2019 revenues for purposes of determining eligibility under the Program?

To be an Eligible Borrower, a Business must meet at least one of the following two conditions:
(a) the Business has 15,000 employees or fewer, or (b) the Business has 2019 annual revenues of $5 billion or less. To determine its 2019 annual revenues, Businesses must aggregate their revenues with those of their affiliates. Businesses may use either of the following methods to calculate 2019 annual revenues for purposes of determining eligibility:

  • A Business may use its (and its affiliates’) annual “revenue” per its 2019 U.S. Generally Accepted Accounting Principles-based (U.S. GAAP) audited financial statements; or
  • A Business may use its (and its affiliates’) annual receipts for the fiscal year 2019, as reported to the Internal Revenue Service. For purposes of the Program, the term “receipts” has the same meaning used by the SBA in 13 CFR 121.104(a).

If a potential borrower (or its affiliate) does not yet have audited financial statements or annual receipts for 2019, the borrower (or its affiliate) should use its most recent audited financial statements or annual receipts.

5Which entities are a Business’s affiliates for purposes of the employee and revenue eligibility criteria?

To determine eligibility, a Business’s employees and 2019 revenues are calculated by aggregating the employees and 2019 revenues of the Business itself with those of the Business’s affiliated entities in accordance with the affiliation test set forth in 13 CFR 121.301(f) (1/1/2019 ed.).

6Are non-profit organizations eligible to borrow under the Program?

Yes. As of September 4, 2020, the NONLF and NOELF, each a Main Street facility open to nonprofit organizations, are operational. A separate document, addresses FAQs about these facilities.

7Will an alternative underwriting metric be developed for asset-based borrowers?

EBITDA is the key underwriting metric required for the MSNLF, MSPLF, and MSELF. The Federal Reserve and the Treasury Department have considered expansions of Main Street to include lending based on collateral values and have determined that conditions do not warrant such changes at this time. We will continue to monitor credit conditions carefully and adjust the Program as appropriate.

8What does “significant operations in the United States” mean?

To determine if an Eligible Borrower has “significant operations” in the United States, the Business’s operations should be evaluated on a consolidated basis together with its subsidiaries, but not its parent companies or sister affiliates. For example, an Eligible Borrower has significant operations in the United States if, when consolidated with its subsidiaries, greater than 50% of the Eligible Borrower’s:

  • assets are located in the United States;
  • annual net income is generated in the United States;
  • annual net operating revenues are generated in the United States; or
  • annual consolidated operating expenses (excluding interest expense and any other expenses associated with debt service) are generated in the United States.

This is a non-exhaustive list of examples that reflects the principles that should be applied by a potential borrower when evaluating its eligibility under this criterion.

9Can a U.S. company that is a subsidiary of a foreign company qualify as an Eligible Borrower?

An Eligible Borrower must be created or organized in the United States or under the laws of the United States. For the avoidance of doubt, an Eligible Borrower may be a subsidiary of a foreign company, provided that the borrower itself is created or organized in the United States or under the laws of the United States, and the borrower on a consolidated basis has significant operations in and a majority of its employees based in the United States. However, an Eligible Borrower that is a subsidiary of a foreign company must use the proceeds of a Main Street loan only for the benefit of the Eligible Borrower, its consolidated U.S. subsidiaries, and other affiliates of the Eligible Borrower that are U.S. businesses. The proceeds of a Main Street loan may not be used for the benefit of such Eligible Borrower’s foreign parents, affiliates or subsidiaries.

10Can an otherwise eligible business borrow if its affiliate has already borrowed under a Main Street Facility or the PMCCF?

An affiliated group of companies can participate in only one Main Street facility, and cannot participate in both a Main Street facility and the PMCCF. Therefore, borrowers that are otherwise eligible are subject to the following restrictions:

  • If any affiliate of the Business has participated in the PMCCF, the Business may not borrow under any Main Street facility.
  • If an affiliate has previously participated, or has a pending application to participate, in a Main Street facility, the Business can only participate in Main Street by using the same Main Street facility accessed by its affiliate. For example, if an Eligible Borrower’s  affiliate has participated in the MSNLF, then the Eligible Borrower would only be able to participate in the MSNLF and would be prohibited from participating in the MSPLF and MSELF.
  • In no case could the affiliated group’s total participation in a single Main Street facility exceed the maximum loan size that the entire affiliated group is eligible to receive on a consolidated basis. As result, an Eligible Borrower’s maximum loan size would be limited by its own leverage level, the leverage level of the affiliated group on a consolidated basis, and the size of any loan extended to other affiliates in the group.

For example, in the case of the MSNLF, the Eligible Borrower’s maximum loan size would be the lesser of:

  • $35 million (less any amount extended to an affiliate of the Eligible Borrower under the MSNLF);
  • an amount that, when added to the Eligible Borrower’s existing outstanding and undrawn available debt, does not exceed four times the Eligible Borrower’s adjusted 2019 EBITDA; or
  • an amount that, when added to the Eligible Borrower’s affiliated group’s existing outstanding and undrawn available debt, does not exceed four times the entire affiliated group’s adjusted 2019 EBITDA.

For the avoidance of doubt, if an Eligible Borrower is the only Business in its affiliated group that has sought funding through Main Street, its affiliated group’s debt and EBITDA are not relevant to determining whether that Business can qualify, except to the extent that the Borrower’s subsidiaries are consolidated into its financial statements. If the Eligible Borrower has an affiliate(s) that has previously borrowed or has an application pending to borrow from a Main Street facility, then the entire affiliated group’s debt and EBITDA are relevant to the determining the Eligible Borrower’s maximum loan size.

11Is a private equity fund eligible to borrow under the Program?

No.  To be an Eligible Borrower under the Program, a Business must not be an Ineligible Business listed in 13 CFR 120.110, as modified and clarified by SBA regulations for purposes of the PPP on or before April 24, 2020. SBA has determined that private equity funds are primarily engaged in investment or speculation, and that such Businesses are therefore ineligible to receive PPP loans under 13 CFR 120.110(s).

12Is a portfolio company of a private equity fund eligible to borrow under the Program?

to determine eligibility, a Business’s employees and 2019 annual revenues are calculated by aggregating the employees and the 2019 annual revenues of the Business itself with those of the Business’s affiliated entities in accordance with the affiliation  test set forth in 13 CFR 121.301(f) (1/1/2019 ed.). This affiliation test applies to private equity owned Businesses in the same manner as any other Business subject to outside ownership or control.

For example, assume Business X seeks to borrow under the Program. Business X has fewer than 15,000 employees and its 2019 annual revenues were below $5 billion. However, Business Y owns more than 50% of the voting equity of Business X and Businesses A, B, C, and D. As a result, Businesses A, B, C, D, X, and Y are all affiliated entities. 13 CFR 121.301(f)(1) and
(3) (1/1/2019 ed.). In order for Business X to be an Eligible Borrower under the Program, it must meet one of the following two conditions: (a) the aggregate number of employees of Business X and its affiliated entities must be 15,000 or fewer; or (b) the aggregate 2019 annual revenues of Business X and its affiliated entities must be $5 billion or less. See 13 CFR 121.301(f)(6) (1/1/2019 ed.).

13Are Eligible Lenders required to adopt any special compliance procedures to verify that a Borrower is not an “Ineligible Business” under 13 CFR 120.110(o)?

No. The terms of the Program do not impose any verification or other obligations on an Eligible Lender specifically in relation to 13 CFR 120.110(o). As a general matter, Eligible Lenders that are subject to regulations designed to prevent improper insider lending (e.g., the Board’s Regulation O (12 CFR part 215)) should maintain compliance with those pre-existing rules and regulations without exception or modification for Main Street.

Under the standard of reasonable, good-faith diligence specified in the Borrower Certifications and Covenants, each prospective Main Street borrower is expected to review the list of Ineligible Businesses in 13 CFR 120.110(b)-(j) and (m)-(s), and make a reasonable, good-faith effort to determine if its activities or ownership would cause it to be classified within one of the listed ineligible categories, including 13 CFR 120.110(o).

For purposes of Main Street only,8 no borrower shall be deemed ineligible based solely on ownership by the Eligible Lender and its corporate affiliates of equity interests in the borrower that do not in the aggregate exceed five percent of the borrower’s total outstanding equity interests. This five percent “safe harbor” would apply, for instance, to a publicly traded borrower where a broker-dealer affiliate of an Eligible Lender holds shares of the borrower, acquired for market-making purposes, in an amount that, taken together with all other equity interests owned by the Eligible Lender and its corporate affiliates, totals less than five percent of the borrower’s outstanding equity interests.

(The SBA affiliation exceptions in 13 CFR 121.103(b) apply to the Program, including the exception for business concerns owned in whole or substantial part by investment companies licensed under the Small Business Investment Act of 1958, as amended. See 13 CFR 121.301(f)(7) (1/1/2019 ed.).

These FAQs do not apply to or affect any other programs, such as the PPP or 7(a) lending programs administered by the SBA. )

14Is a business operating as a sole proprietorship eligible for a Main Street loan?

No. Sole proprietorships that are not otherwise established under law as a “Business,”.

Application Process

1How can I apply for a Program loan?

To obtain a loan under the Program, an Eligible Borrower must submit an application and any other documentation required by an Eligible Lender to such Eligible Lender. Eligible Borrowers should contact an Eligible Lender for more information on whether the Eligible Lender plans to participate in the Program and to request more information on the application process. For a list of Eligible Lenders that are currently accepting applications from new customers.

2Is a Business eligible to borrow if it receives a PPP loan or Economic Injury Disaster loan (EIDL)?

A Business that receives a loan through the SBA’s PPP or EIDL program can be an Eligible Borrower under Main Street if it meets the Eligible Borrower criteria.

3Do Eligible Borrowers qualify automatically for a loan under the Program?

No. The Main Street facility term sheets contain requirements that must be satisfied for a loan to be eligible for participation by the Main Street SPV. At the time of the potential borrower’s application, an Eligible Lender is expected to assess each borrower’s pre-pandemic financial condition and post-pandemic prospects, while also taking into account the payment deferral features in Main Street loans. An Eligible Lender may require additional information and documentation in making this evaluation and will ultimately determine whether an Eligible Borrower is approved for a Program loan in light of these considerations. Businesses that otherwise meet the Eligible Borrower requirements may not be approved for a loan or may not receive the maximum allowable amount.

4Can an Eligible Borrower apply for a Main Street loan through multiple Eligible Lenders?

An Eligible Borrower may submit applications for a Main Street loan to more than one Eligible Lender. However, an Eligible Borrower is required to notify each Eligible Lender to which it submits an application of any other pending or accepted applications.  If an Eligible Borrower’s application for a Main Street loan is declined by an Eligible Lender, the Eligible Borrower may apply through a different Eligible Lender.

Terms and Conditions

1How will adjusted 2019 EBITDA be calculated?

For the MSNLF and MSPLF, the methodology an Eligible Lender requires an Eligible Borrower to use when calculating its adjusted 2019 EBITDA must be a methodology the Eligible Lender previously required to be used for adjusting EBITDA when extending credit to the Eligible Borrower or to similarly situated borrowers on or before April 24, 2020.

2How will “existing outstanding and undrawn available debt” be calculated?

“Existing outstanding and undrawn available debt” includes all amounts borrowed under any loan facility, including unsecured or secured loans from any bank, non-bank financial institution, or private lender, as well as any publicly issued bonds or private placement facilities, regardless of its position in the borrower’s capital structure. It also includes all unused commitments under any loan facility, excluding (1) any undrawn commitment that serves as a backup line for commercial paper issuance, (2) any undrawn commitment that is used to finance receivables (including seasonal financing of inventory), (3) any undrawn commitment that cannot be drawn without additional collateral, and (4) any undrawn commitment that is no longer available due to change in circumstance. Existing outstanding and undrawn available debt should be calculated as of the date of the loan application.

3Why are Program loans based on LIBOR rather than SOFR?

The Federal Reserve received feedback from potential participants that quickly implementing new systems to issue loans based on SOFR would require diverting resources from challenges related to the pandemic. Although financial institutions are transitioning to more robust reference rates, LIBOR remains the most common base rate used in business lending, even
though firms cannot rely on LIBOR being published after the end of 2021. Consistent with the recommendations of the Alternative Reference Rates Committee (ARRC), Eligible Lenders and Eligible Borrowers should include fallback contract language to be used should LIBOR become unavailable during the term of the loan.

4When do I need to start paying interest and principal on my loan?

No payments of principal will be required for the first two years of an MSNLF Loan, MSPLF Loan, or MSELF Upsized Tranche, and no payments of interest will be required during the first year of an MSNLF Loan, MSPLF Loan, or MSELF Upsized Tranche. Unpaid interest will be capitalized in accordance with the Eligible Lender’s customary practices for capitalizing interest (e.g., at quarter-end or year-end). After the first year interest will be payable in accordance with the loan agreement for the MSNLF Loan, MSPLF Loan, or MSELF Upsized Tranche.

5How will principal be amortized after the second year?

No principal is paid in the first or second year. The loan will be amortized over the remaining term of the loan, with 15% of principal due at the end of year 3, 15% of principal due at the end of year 4, and a balloon payment of 70% of principal due at maturity at the end of year 5. For purposes of this question, principal includes capitalized interest. Eligible Lenders will provide Eligible Borrowers with payment information during the Program loan origination process.

6Is collateral required for Main Street loans?

MSNLF Loans, MSPLF Loans, and MSELF Upsized Tranches may be secured or unsecured,although collateral may be required for MSPLF Loans and MSELF Upsized Tranches due to the Eligible Borrower’s other loans and debt instruments.

An MSELF Upsized Tranche must be secured if the underlying loan is secured. In such case, any collateral securing the underlying loan (at the time of upsizing or on any subsequent date) must secure the MSELF Upsized Tranche on a pari passu basis. Under such an arrangement, if the borrower defaults, the SPV and lender(s) would share equally in any collateral available to support the loan relative to their proportional interests in the loan (including the MSELF Upsized Tranche). Eligible Lenders can require Eligible Borrowers to pledge additional collateral to secure an MSELF Upsized Tranche as a condition of approval.

(PPP loans can be excluded from “existing outstanding and undrawn debt” under certain specified conditions.)

7Are there fees associated with Main Street loans?

Yes, there are fees associated with the MSNLF, MSPLF, and MSELF.

• MSNLF and MSPLF:

-Transaction Fee: If the initial principal amount of the Eligible Loan is $250,000 or greater, Eligible Lenders will pay the Main Street SPV a transaction fee of 100 basis points of the principal amount of the MSNLF or MSPLF Loan at the time of origination, and may pass on this fee to Eligible Borrowers.12 No transaction fee will be imposed if the initial principal amount of the Eligible Loan is less than $250,000. 

-Loan Origination Fee: If the initial principal amount of the Eligible Loan is $250,000 or greater, the Eligible Borrower will pay the Eligible Lender a fee of up to 100 basis points of the principal amount of the MSNLF or MSPLF Loan at the time of origination. If the initial principal amount of the Eligible Loan is less than $250,000, an Eligible Borrower will pay an Eligible Lender an origination fee of up to 200 basis points of the principal amount of the Eligible Loan at the time of
origination. Eligible Lenders have discretion over whether and when to charge Eligible Borrowers this fee. 

-Loan Servicing Fee: If the initial principal amount of the Eligible Loan is $250,000 or greater, the SPV will pay an Eligible Lender 25 basis points of the principal amount of its participation per annum for loan servicing. If the initial principal amount of the Eligible Loan is less than $250,000, the SPV will pay an Eligible Lender 50 basis points of the principal amount of its participation in the Eligible Loan per annum for loan servicing. Eligible Lenders should consult the Servicing Agreement for more information.

• MSELF:

-Transaction Fee: Eligible Lenders will pay the Main Street SPV a transaction fee of 75 basis points of the principal amount of the MSELF Upsized Tranche at the time of upsizing, and may choose to pass on this fee to Eligible Borrowers. 

-Loan Origination Fee: The Eligible Borrower will pay an Eligible Lender a fee of up to 75 basis points of the principal amount of the MSELF Upsized Tranche at the time of upsizing. Eligible Lenders have discretion over whether and when to charge Eligible Borrowers this fee.

-Loan Servicing Fee: The SPV will pay an Eligible Lender 25 basis points of the principal amount of its participation per annum for loan servicing. Eligible Lenders should consult the Servicing Agreement for more information.

8What constitutes “commercially reasonable efforts” to maintain payroll and retain employees?

Eligible Borrowers should make commercially reasonable efforts to retain employees during the term of the MSNLF Loan, MSPLF Loan, or MSELF Upsized Tranche. Specifically, an Eligible Borrower should undertake good-faith efforts to maintain payroll and retain employees, in light of its capacities, the economic environment, its available resources, and the business need for labor. Borrowers that have already laid-off or furloughed workers as a result of the disruptions from COVID-19 are eligible to apply for Main Street loans.

9Can an Eligible Borrower receive more than one Main Street loan?

An Eligible Borrower may only participate in one of the Main Street facilities: the MSNLF, the MSPLF, the MSELF, the NONLF, or the NOELF. However, an Eligible Borrower may receive more than one loan under a single Main Street facility, provided that the sum of MSNLF Loans cannot exceed $35 million; the sum of MSPLF Loans cannot exceed $50 million; and the sum of MSELF Upsized Tranches cannot exceed $300 million.

While Eligible Borrowers are permitted to receive more than one loan from a single Main Street facility, the Main Street SPV will not accept more than one loan made to a single Eligible Borrower by the same Eligible Lender with an initial principal amount of less than $250,000 within 60 days. This restriction is intended to prevent Eligible Lenders from originating multiple loans with an initial principal amount of less than $250,000 to the same Eligible Borrower in order to benefit from the fee structure.

10Can an Eligible Borrower receive a loan if its maximum loan size under a facility’s term sheet test is below the minimum loan size for the same facility?

No, borrowers may not receive a loan that is below the minimum loan size, which is $100,000 for MSNLF Loans and MSPLF Loans, and $10 million for MSELF Upsized Tranches.

11How can an Eligible Borrower determine if its existing loans had an internal risk rating equivalent to a “pass” in the FFIEC’s supervisory rating system on December 31, 2019?

If an otherwise Eligible Borrower applies for a loan at an Eligible Lender with which it has an outstanding loan, the Eligible Lender will make the determination of whether the borrower’s existing loans have an internal risk rating that meets the requirements in the Main Street term sheets. The Eligible Lender will also assess the potential borrower’s pre-pandemic financial condition and post-pandemic prospects at the time of the application.

12Can a Lender charge a Borrower additional fees above the Main Street origination fee and/or an interest rate above LIBOR + 300 basis points?

Eligible Lenders are allowed to charge Eligible Borrowers a one-time origination fee as set out in the Main Street term sheets. In addition, if a transaction fee is imposed (i.e., if the initial principal amount of the Eligible Loan is $250,000 or greater), Eligible Lenders may also require Eligible Borrowers to pay the transaction fee, which the Eligible Lenders must in turn pay to the Main Street SPV. Eligible Lenders are not permitted to charge Eligible Borrowers any additional fees, except de minimis fees for services that are customary and necessary in the Eligible Lender’s underwriting of commercial and industrial loans to similar borrowers, such as appraisal and legal fees. Eligible Lenders may also charge customary consent fees if such fees are necessary to amend existing loan documentation in the context of upsizing a loan in connection with the MSELF.13 Eligible Lenders should not charge servicing fees to Eligible Borrowers.

Main Street loans must have an interest rate of LIBOR (1 month or 3 month) plus 300 basis points.

(Customary consent fees may also be charged if the Eligible Borrower’s other loans or debt instruments need to be amended in order to facilitate the origination of a new MSNLF Loan or MSPLF Loan.)

13What methodology should be used to adjust EBITDA if an Eligible Lender has used a range of methods in the past with respect to a single Eligible Borrower or similarly situated borrowers?

An Eligible Lender should require the Eligible Borrower to adjust its 2019 EBITDA by using the methodology that the Eligible Lender has previously required for EBITDA adjustments when extending credit to the Eligible Borrower or, if the Eligible Borrower is a new customer, similarly situated borrowers on or before April 24, 2020. If an Eligible Lender has used multiple EBITD Aadjustment methods with respect to the Eligible Borrower or similarly situated borrowers (e.g., one for use within a credit agreement and one for internal risk management purposes), the Eligible Lender should choose the most conservative method it has employed. In all cases, the Eligible Lender must select a single method used at a point in time in the recent past and before April 24, 2020. The Eligible Lender may not “cherry pick” or apply adjustments used at different points in time or for a range of purposes. The Eligible Lender should document the rationale for its selection of an adjusted EBITDA methodology.

14For purposes of adjusting EBITDA, how does an Eligible Lender identify “similarly situated borrowers”?

Similarly situated borrowers are borrowers in similar industries with comparable risk and size characteristics. Eligible Lenders should document their process for identifying similarly situated borrowers when they originate an MSNLF Loan or an MSPLF Loan.

15Why is the Federal Reserve allowing adjustments to EBITDA for purposes of Main Street when it has noted supervisory concerns with these adjustments in the past? Is there a limit to how much EBITDA can be adjusted?

It is normal industry practice for lenders and borrowers to agree to adjust a borrower’s EBITDA to accommodate differences in business models across industries and to accommodate onetime events that may positively or negatively impact a borrower’s earnings. When applied prudently, these adjustments may provide a lender with a more accurate representation of a business’s earnings capacity over time.


While the Main Street term sheets do not include limits on how much EBITDA can be adjusted, there are important features of the Program that are designed to limit excessive risk-taking. First, EBITDA adjustments must be of the type the Eligible Lender has previously (and recently) required for the Eligible Borrower or similarly situated borrowers. The Eligible Lender should document the rationale for its selection of an adjusted EBITDA methodology.

In addition, the EBITDA-based leverage requirements should be viewed as minimum requirements for the Program. Eligible Lenders are expected to conduct an assessment of each potential borrower’s pre-pandemic financial condition and post-pandemic prospects at the time of the borrower’s application.

Finally, the Program requires that a Main Street loan have an internal risk rating from the Eligible Lender equivalent to a “pass” in the FFIEC’s supervisory rating system as of December 31, 2019. Loans that were criticized in the past for excessive adjustments would not be eligible for the Program.

16Do PPP loans count as “outstanding debt” for purposes of Main Street?

When computing “existing outstanding and undrawn available debt” for purposes of determining the maximum allowable loan amount under Main Street, Eligible Lenders and Eligible Borrowers may exclude PPP debt, as set out in (A) and (B) below, provided that the Eligible Borrower, together with its affiliates (as defined for purposes of the PPP), received PPP loans with original principal amounts totaling less than $2 million. Under such circumstances, the following may be excluded from the “existing outstanding and undrawn available debt” calculation:

  • If the Eligible Borrower has applied for forgiveness of its PPP loan, the “Forgiveness Amount” as reported by the Eligible Borrower on Line 11 of the SBA’s Form 3508, on Line 8 of Form 3508EZ, or on Form 3508S, as applicable, may be excluded, except to the extent the Eligible Borrower’s PPP lender or SBA has determined that such amount is ineligible for forgiveness
  • If the Eligible Borrower has not yet applied for forgiveness of its PPP loan, the amount of its PPP loan that its principal executive officer has a reasonable, good-faith basis to believe will be forgiven in accordance with applicable PPP requirements, after review of the SBA’s Form 3508, Form 3508EZ, or Form 3508S, as applicable, including the relevant instructions, may be excluded.

For the avoidance of doubt, an Eligible Borrower that, together with its affiliates (as defined for purposes of the PPP), received PPP loans with original principal amounts totaling $2 million or more, may not exclude any of the outstanding portion of such loans from “existing outstanding and undrawn available debt,” except to the extent that the SBA has actually determined that such loans are eligible for forgiveness.

Each Eligible Borrower seeking to exclude some or all of its PPP debt from the calculation of “existing outstanding and undrawn available debt” as provided by this FAQ must, during the Main Street loan underwriting process, provide its Eligible Lender with either a copy of the PPP loan forgiveness application form (SBA Form 3508, 3508EZ, or 3508S) the Eligible Borrower has already completed and submitted to its PPP lender or lender servicing its PPP loan (which may be the same as the Eligible Lender), or a completed and signed version of the Exclusion of PPP Loan from Main Street “Outstanding Debt” form, as applicable.

If the PPP lender or SBA has determined that all or part of an Eligible Borrower’s PPP loan is not forgivable prior to the submission of a Main Street loan to the Main Street Portal, the portion of the PPP loan that the PPP lender or SBA has determined is not forgivable must be included in the “existing outstanding and undrawn available debt” calculation. For the avoidance of doubt, Eligible Lenders and Eligible Borrowers may exclude 100% of the amount of any PPP loan that SBA has determined is eligible for forgiveness.

This framework for excluding an Eligible Borrower’s PPP loan from the Main Street “existing outstanding and undrawn available debt” calculation reflects the Federal Reserve’s and Treasury’s intention to support lending to PPP borrowers that are otherwise eligible to borrow under Main Street, but may not receive the SBA’s PPP loan forgiveness decisions by the time of their Main Street loans. It does not reflect any forecast or assessment of the actual expected amount of PPP loan forgiveness for any PPP borrowers.1

17How will Eligible Borrower prepayments of a Main Street loan be applied against the principal amount due and future amortization payments?

Prepayment of principal is permitted without penalty and will reduce future payments in the manner specified in the underlying loan documents. While lenders have flexibility in specifying these terms, they should make efforts to align their approach with the expected amortization schedule specified for each loan type. For example, applying prepayments to the next scheduled principal payment due would maintain the alignment of later payments with the amortization schedule and allow for the intended deferment of some portion of payments to later years.

18Can permissible fees charged at the time of origination be included in the principal amount of a Main Street loan?

Yes. Eligible Lenders may charge certain fees to Eligible Borrowers at the time of origination. Eligible Lenders may include such fees in the principal amount of the Main Street loan, provided that the total Main Street loan amount, including
such fees, may not exceed the maximum loan size permitted for the Eligible Borrower under the relevant Main Street facility.

19Are Eligible Lenders allowed to include a LIBOR floor in the interest rate on a Main Street Loan?

MSNLF Loans, MSPLF Loans, and MSELF Upsized Tranches must be adjustable-rate five-year term loans with an interest rate of 1-month or 3-month LIBOR plus 300 basis points. LIBOR floors are not permissible. 

( Certain Businesses that meet the Eligible Borrower requirements may not be approved for a loan or receive the maximum allowable amount.)

20Can an otherwise Eligible Borrower receive a Main Street loan if it was not in operation during 2019?

In order to receive a Main Street loan, an Eligible Borrower must have a financial record upon which calculation of an adjusted 2019 EBITDA can be based.15 If an otherwise Eligible Borrower was established before March 13, 2020, but does not have a financial history sufficient to establish that it was in sound financial condition before the onset of the pandemic (i.e., using an adjusted 2019 EBITDA that covers at least part of the calendar year 2019), it will not qualify for a Main Street loan.


Entities that were established before March 13, 2020, and have no financial record of their own, but have clear predecessors or subsidiaries that can be referenced to calculate adjusted 2019 EBITDA can use the financial records of such predecessors or subsidiaries. For example, if a potential Main Street borrower was established on February 1, 2020, thereafter purchased an existing business and is, in the judgment of an Eligible Lender, that business’s successor, it may
use the predecessor business’s 2019 financial records.

21Are there any prohibitions on the use of proceeds of a Main Street loan?

The Program is intended to help small and medium-sized companies that were in sound financial condition prior to the onset of the COVID-19 pandemic maintain their operations and payroll until conditions normalize. However, Program loans may not be used:

  • • with respect to an Eligible Borrower that is a subsidiary of a foreign company, for the benefit of an Eligible Borrower’s foreign parents, affiliates, or subsidiaries; or
  • to refinance or accelerate payment of existing debt, except  at the time of origination of an MSPLF Loan if the debt was owed to a different, unaffiliated lender, or under the limited exception for mandatory and due debt and interest payments after the origination of the Main Street loan.

In addition, under the Program an Eligible Borrower may not use any funds (including the proceeds of a Main Street loan) during the term of the loan (and, in some cases, for 12 months after the Main Street loan is repaid) for the following reasons:

  • paying dividends, distributing capital, repurchasing equity, or paying compensation over specified thresholds, except as provided under section 2.D of the MSNLF, MSPLF, or MSELF Borrower Certifications and Covenants or these FAQs; or
  • repaying other debt ahead of schedule
22.Is an Eligible Lender restricted from setting monthly or quarterly interest payments after the first year, or will interest be required to be payable annually along with amortization payments of principal?

After the first year of the loan, an Eligible Lender may require the payment of interest at the frequency it would ordinarily require payment with respect to loans made to similarly situated borrowers (e.g., quarterly or annually). The Federal Reserve does not expect that the frequency would ever be more than monthly.

23Can an Eligible Lender require an Eligible Borrower to provide collateral or guarantees solely with respect to the Eligible Lender’s 5% retained portion of a Main Street loan?

No. The Eligible Lender and Main Street SPV must share losses on a pari passu basis (i.e.,ratably, without preference). Any collateral pledged or guarantees made in connection with a Main Street loan must apply to the entire MSNLF Loan, MSPLF Loan, or MSELF Upsized Tranche.

24Are personal guarantees required and/or permitted?

Personal guarantees are not required under Program terms. However, an Eligible Lender may require a guarantee as part of its own underwriting process. As with collateral providing security for a Main Street loan, guarantees must extend to the entire loan such that the Main Street SPV and Eligible Lender share losses on a pari passu basis.

25If an Eligible Borrower’s outstanding debt is maturing within 90 days, can a Main Street loan be used to refinance such debt at the time of origination?

No. The only circumstances under which a Main Street loan’s proceeds can be used to refinance an existing borrower debt at the time of Main Street loan origination are under the MSPLF if the existing borrower debt is owed to a different, unaffiliated lender. While Eligible Borrowers are permitted to refinance debt that is maturing within 90 days
during the life of a Main Street loan, it may not be done at origination, unless it is a qualifying MSPLF refinancing.

26Can an Eligible Lender or Eligible Borrower hedge interest rate and credit risk in connection with Main Street loans?

Yes. Eligible Lenders and Eligible Borrowers may hedge interest rate risk associated with Main Street loans. Eligible Lenders may also hedge credit risk associated with a Main Street borrower’s industry, but may not engage in borrower name specific hedging of a Main Street loan.

27Can Eligible Lenders and Eligible Borrowers agree to include cash collateral deposits, compensating balances, cash reserve accounts, or cash escrow accounts at origination or during the life of a Main Street loan as part of the loan terms?

Yes, but there are limits to this practice.

  • Cash Balances for Purposes of Collateral or Loan Payments. The Federal Reserve and Treasury Department do not encourage the practice of requiring an Eligible Borrower to maintain cash balances that are restricted to serving as collateral or paying principal or interest on the Main Street loan when mandatory and due (e.g. compensating balances,
    cash collateral or cash escrow accounts). Eligible Lenders and Eligible Borrowers may, however, agree to include these features at origination or during the life of a Main Street loan as part of the loan terms if such terms are a normal component of the Eligible Lender’s underwriting practices for similarly situated borrowers and do not exceed 15% of the outstanding balance of the Main Street Loan. Further, such balances should not be used to prepay principal or interest of the Main Street loan, except at the option of the Eligible Borrower during the life of the loan. Eligible Lenders should make every effort to minimize such requirements and align their approach with the expected interest payment and principal amortization schedule specified for Program loans.
  • Delayed Draw Balances. In addition, Eligible Lenders and Eligible Borrowers may agree to place a portion of the proceeds of a Main Street loan in an account held at the Eligible Lender and delay draw on those funds until certain conditions related to the Eligible Borrower’s operations are met. Such conditions may include requirements that Eligible Borrowers provide documentation or other evidence that loan proceeds are being withdrawn to fund pre-agreed activities or purchases by the Borrower, or that the Eligible Borrower pledge additional collateral to secure the Main Street loan that is not available at the time of origination. Any restriction must be substantially similar to a
    condition placed on similarly situated borrowers by the Eligible Lender in the course of its ordinary underwriting. In addition, Eligible Lenders may not use such loan features for the purpose of ensuring funds are available for mandatory and due payments on other debt owed by the Eligible Borrower, except in the case of a permitted refinancing of existing debt under the MSPLF. In any case, such conditions must be included in the loan agreement at origination and must be fully transparent to the Eligible Borrower. For the avoidance of doubt, the quantitative 15% limit would not
    apply to such loan features.

Certifications and Covenants

1*************************************

The certifications for Lenders and Borrowers vary by Main Street facility and are available below:

2What compensation, stock repurchase and capital distributions restrictions apply?

The compensation, stock repurchase, and capital distribution restrictions that apply to direct loan programs under section 4003(c)(3)(A) of the CARES Act apply under each of the MSELF, MSNLF and MSPLF, except that, in each case, restrictions on dividends and other capital distributions will not apply to:

  • distributions made by an S corporation or other tax pass-through entity to the extent reasonably required to cover its owners’ tax obligations in respect of the entity’s earnings; or
  • distributions made by a tribal business to a tribal government owner
  • Detailed instructions are provided in the MSNLF, MSPLF, and MSELF Borrower Certifications and Covenants.
3What restrictions are placed on the Eligible Borrower’s ability to repay existing debt?

The restrictions on repaying debt vary across the various Main Street loans:

  • MSNLF and MSELF: The Eligible Borrower must commit to refrain from repaying the principal balance of, or paying any interest on, any debt until the MSNLF Loan or the MSELF Upsized Tranche is repaid in full, unless the debt or interest payment is mandatory and due. The Eligible Borrower must also commit that it will not seek to cancel or reduce any of its committed lines of credit with the Eligible Lender or any other lender.
  • MSPLF: The Eligible Borrower must commit to refrain from repaying the principal balance of, or paying any interest on, any debt until the MSPLF Loan is repaid in full, unless the debt or interest payment is mandatory and due; however, the Eligible Borrower may, at the time of origination of the MSPLF Loan, refinance existing debt owed by the Eligible Borrower to a lender that is not the Eligible Lender or one of its affiliates. The Eligible Borrower must also commit that it will not seek to cancel or reduce any of its committed lines of credit with the Eligible Lender or any other lender.

These covenants would not prohibit an Eligible Borrower from undertaking any of the following actions during the term of the MSNLF Loan, MSPLF Loan, or MSELF Upsized Tranche:

  • repaying a line of credit (including a credit card) in accordance with the Eligible Borrower’s normal course of business usage for such line of credit;
  • taking on and paying additional debt obligations required in the normal course of business and on standard terms, including inventory and equipment financing, provided that such debt is secured only by the newly acquired property (e.g., inventory or equipment), and, apart from such security, is of equal or lower priority than the MSNLF Loan, the MSPLF Loan, or the MSELF Upsized Tranche; or
  • refinancing debt that is maturing no later than 90 days from the date of such refinancing.
4Is an Eligible Lender permitted to accept partial repayment of an Eligible Borrower’s existing line of credit with the Eligible Lender?

The Eligible Lender would not be prevented from accepting repayments on a line of credit from an Eligible Borrower in accordance with the Eligible Borrower’s normal course of business usage for such line of credit.

5What restrictions are placed on an Eligible Lender’s ability to cancel or reduce any existing committed lines of credit outstanding?

An Eligible Lender must commit that it will not cancel or reduce any existing committed lines of credit outstanding to the Eligible Borrower, except in an event of default. This requirement does not prohibit the reduction or termination of uncommitted lines of credit, the expiration of existing lines of credit in accordance with their terms, or the reduction of availability under existing lines of credit in accordance with their terms due to changes in borrowing bases or
reserves in asset-based or similar structures.

6What is the Eligible Lender’s role in verifying certifications and covenants?

An Eligible Lender is required to collect the required certifications and covenants from each Eligible Borrower at the time of origination or upsizing. Eligible Lenders may rely on an Eligible Borrower’s certifications and covenants, as well as any subsequent self-reporting by the Eligible Borrower. The Eligible Lender is not expected to independently verify the Eligible Borrower’s certifications or actively monitor ongoing compliance with covenants required for Eligible Borrowers under the Main Street term sheets. If an Eligible Lender becomes aware that an Eligible Borrower made a material misstatement or otherwise breached a covenant during the term of an MSNLF Loan, MSPLF Loan, or MSELF Upsized Tranche, the Eligible Lender should notify the FRB Boston. For more detail, please see the MSNLF, MSPLF, and MSELF Lender Transaction-Specific Certifications and Covenants.

(6 Eligible Lenders and Eligible Borrowers are expected to act in good faith with respect to this requirement and in light of the goals of Main Street. In particular, Eligible Borrowers and Eligible Lenders are discouraged from originating Main Street loans for the purpose of funding debt payments that are, or are presently expected to become, mandatory by operation of a debt covenant or mandatory prepayment provision.)

7What debt and interest payments are considered “mandatory and due”?

The debt repayment covenants generally prohibit an Eligible Borrower from repaying the principal balance of, or paying any interest on, any debt until the Main Street loan is repaid in full, unless the principal or interest payment is “mandatory and due.” With respect to debt that predates the Main Street loan, principal and interest payments are “mandatory and due”:

  • on the future date upon which they were scheduled to be paid as of the date of origination of the Main Street loan, or
  • upon the occurrence of an event that automatically triggers mandatory prepayments under a contract for indebtedness that the Eligible Borrower executed prior to the date of origination of a Main Street loan, except that any such prepayments triggered by the incurrence of new debt can only be paid:

- if such prepayments are de minimis, or

-under the MSPLF at the time of origination of an MSPLF Loan. 

For the avoidance of doubt, under the Program, Eligible Borrowers may continue to pay, and Eligible Lenders may request that Eligible Borrowers pay, interest or principal payments on outstanding debt on (or after) the payment due date, provided that the payment due date was scheduled prior to the date of origination of a Main Street loan. Eligible Borrowers may not pay, and Eligible Lenders may not request that Eligible Borrowers pay, interest or principal payments on such debt ahead of schedule during the life of the Program loan, unless required by a mandatory prepayment clause as specifically permitted above. For future debt incurred by the Borrower in compliance with the terms and conditions of the Program loan, principal and interest payments are “mandatory and due” on their scheduled dates or upon the occurrence of an event that automatically triggers mandatory prepayments.

8Can an Eligible Borrower receive an MSNLF Loan or an MSELF Upsized Tranche if its existing debt arrangements require prepayment of an amount that is not de minimis upon the incurrence of new debt?

If an Eligible Borrower has an existing debt arrangement that requires prepayment of more than a de minimis amount upon the incurrence of new debt, the Eligible Borrower cannot receive an MSNLF Loan or an MSELF Upsized Tranche unless such requirement is waived or reduced to a de minimis amount by the relevant creditor.

9How must a Main Street borrower demonstrate that it is “unable to secure adequate credit accommodations from other banking institutions”?

Being unable to secure adequate credit accommodations does not mean that no credit from other sources is available to the borrower. Rather, the borrower may certify that it is unable to secure “adequate credit accommodations” because the amount, price, or terms of credit available from other sources are inadequate for the borrower’s needs during the current unusual and exigent circumstances. Borrowers are not required to demonstrate that applications for credit had been denied by other lenders or otherwise document that the amount, price, or terms of credit available elsewhere are inadequate. See the MSNLF, MSPLF, and MSELF Borrower Certifications and Covenants for details.

10How should Eligible Borrowers prepare financial records and determine inputs to their 2019 adjusted EBITDA calculation in connection with section 4.A of the Borrower Certifications and Covenants?

Under section 4.A of the Borrower Certifications and Covenants for each Main Street facility, the Eligible Borrower must certify that it has provided financial records to the Eligible Lender and a calculation of the Borrower’s adjusted 2019 EBITDA, reflecting only those adjustments permitted pursuant to the methodology that the Borrower agreed upon with the Eligible
Lender, and such financial records fairly present, in all material respects, the financial condition of such entities for the period covered thereby in accordance with U.S. GAAP (if applicable), consistently applied, and that such adjusted EBITDA calculations are true and correct in all material respects. Eligible Borrowers are expected to submit statements to their Eligible Lender as follows:

  • U.S. GAAP Compliance: Eligible Borrowers that are subject to U.S. GAAP reporting requirements or that already prepare their financials in accordance with U.S. GAAP must submit U.S. GAAP-compliant financial records in connection with this certification. Eligible Borrowers that do not have to comply with U.S. GAAP and that do not typically prepare their financials in accordance with U.S. GAAP are not required to submit U.S. GAAP compliant financials.
  • Financial Statements: Eligible Borrowers that typically prepare audited financial statements must submit audited financial statements. Otherwise Eligible Borrowers should submit reviewed financial statements or financial statements prepared for the purpose of filling taxes. If an Eligible Borrower does not yet have audited or reviewed financial statements for 2019, the Eligible Borrower should use its most recent audited or reviewed financial statements. If an Eligible Borrower’s fiscal year 2019 does not coincide with calendar year 2019, it may use its 2019 fiscal year, unless otherwise required by the Eligible Lender.
  • Consolidation: Eligible Borrowers that typically prepare financial statements that consolidate the Eligible Borrower with its subsidiaries (but not its parent companies or sister affiliates)18 must submit such consolidated financial statements. If an Eligible Borrower does not typically prepare consolidated financial statements, it is not required
    to do so, unless so required by the Eligible Lender.

The relevant inputs to the Eligible Borrower’s EBITDA calculation, which will reflect adjustments permitted pursuant to the methodology to which the Eligible Borrower agreed with the Eligible Lender, should come from the Eligible Borrower’s financial statements, as outlined above.

11In certifying that an Eligible Borrower or Eligible Lender is not a “covered entity” under the conflicts of interest certification, what level of reasonable diligence is required with regard to equity interests (including non-voting preferred stock) held by financial intermediaries?

Section 4019(c) of the CARES Act requires each Eligible Borrower and Eligible Lender to certify to the Secretary and the Board that it is not an entity in which the President, Vice President, head of an executive department, member of Congress, or certain immediate family members of such government officials (each, a Covered Individual) directly or indirectly holds a “controlling interest.” In light of limited public information on ownership interests of government officials and their family members, the instructions to the conflicts of interest certification prescribe the level of diligence required to make a conflicts of interest certification in good faith. The reasonable diligence standard establishes a standard that is both necessary and sufficient for the entity to undertake in making the conflicts of interest certification, and is consistent among all Federal Reserve lending programs and facilities that involve funds invested by the Treasury Department under authority provided by the CARES Act. An Eligible Borrower or Eligible Lender may choose, but is not required, to take additional steps in conducting diligence. 

The reasonable diligence standard applies to all types of equity interests, as defined by section 4019(a)(6) of the CARES Act, including common stock, preferred stock, and equivalent interests in limited liability companies or partnerships. In all cases, an Eligible Lender or Eligible Borrower must consider its actual knowledge, determine whether beneficial owners of any 5% or greater equity interest are Covered Individuals and, if necessary, ask the beneficial owners to confirm whether they are Covered Individuals. If information regarding beneficial ownership has been disclosed pursuant to sections 13(d) and 13(g) of the Securities Exchange Act of 1934 (Exchange Act), the Eligible Borrower or Eligible Lender may rely on this information in addition to its actual knowledge.

Beneficial owners may hold their positions through financial intermediaries (e.g., brokerdealers, custodians, and investment funds). As with all types of equity interests, to satisfy the reasonable diligence standard discussed above and set out in the certification instructions, the Eligible Borrower or Eligible Lender must consider, with respect to equity interests held by
financial intermediaries, its actual knowledge (including information contained in Exchange Act beneficial ownership disclosures, if available) and, based on this information, determine whether any identified beneficial owners of any 5% or greater equity interest are Covered Individuals.

For example, Lender A has 100 shares of non-voting preferred stock outstanding for which the Exchange Act does not require beneficial ownership disclosure. Fifteen percent of Lender A’s preferred shares are held by a financial intermediary. With respect to these shares, Lender A considers its actual knowledge, including all information it has regarding beneficial ownership of its preferred shares (recognizing that there are no Exchange Act section 13(d) or 13(g) disclosures). In this case, Lender A is not required to take further action and has satisfied the reasonable diligence standard.

12How should Eligible Borrowers calculate “total compensation” for purposes of complying with limits on compensation under the direct loan restrictions?

Total compensation includes salary, bonuses, awards of stock, and other financial benefits provided by the Eligible Borrower and its affiliates to an officer or employee of the Eligible Borrower, but does not include the value of severance pay or other benefits paid in connection with a termination of employment.

  • Eligible Borrowers that are public companies. An Eligible Borrower that is, or is a consolidated subsidiary of, an entity that is required to disclose information in accordance with the Securities and Exchange Commission’s Regulation S-K
    (17 CFR part 229) (a public company) must calculate total compensation according to the methodology set out in item 402(c) of Regulation S-K (item 402(c)) (17 CFR 229.402(c)(2)).
  • Eligible Borrowers that are not public companies. An Eligible Borrower that is not a public company may choose to calculate compensation in a manner consistent with the federal tax rules if the Eligible Borrower meets the criteria described in (a) or (b) below. An Eligible Borrower that is not a public company and does not choose to calculate compensation in a manner consistent with the federal tax rules must use item 402(c) to calculate total compensation. An Eligible Borrower must choose which approach to use upon disbursement of the Main Street loan and apply it for as long as the Main Street loan is outstanding and for 12 months thereafter.

(a)    Small Eligible Borrowers that are not public companies. An Eligible Borrower that is not a public company and that had gross revenues for its financial year ending in 2019 of less than or equal to $10,000,000, may calculate total compensation in a manner consistent with the federal tax rules.

(b)    Officers and Employees that receive limited deferred compensation. An Eligible Borrower that is not a public company and that had gross revenues for its financial year ending in 2019 of greater than $10,000,000, may calculate compensation in a manner consistent with the federal tax rules for all officers or employees who are not Significant Deferred Compensation Recipients. A Significant Deferred Compensation Recipient means an officer or employee who, during any 12-month period beginning January 2019 and until 12 months after the date on which the Main Street loan is no longer outstanding, has total compensation that exceeds $425,000, out of which the fair value of deferred compensation granted to such officer or employee exceeds 30%. Eligible Borrowers should use U.S. GAAP to determine which of its officers and employees are Significant Deferred Compensation Recipients.
Deferred compensation is a legally binding right to receive compensation awarded to an officer or employee in one taxable year but not payable until a later taxable year, and includes stock-based compensation the fair value of which is determined according to FASB ASC topic 718.

Eligible Borrowers that choose to calculate total compensation according to the federal tax rules must use the timing and valuation methodology, including the valuation of fringe benefits and bonuses, that apply for purposes of determining when amounts are treated as wages under Internal Revenue Code section 3401(a) for income tax withholding, or net earnings from self-employment under Internal Revenue Code section 1402(a). In addition, total compensation as calculated under the federal tax rules includes elements of compensation paid to an officer or employee who is either:

  • an individual for whom the Eligible Borrower would be responsible for reporting compensation on Form W-2, and includes commissions, educational assistance, and benefits or wages that are paid in kind (such as meals or lodging) if they would be treated as taxable compensation subject to federal income tax withholding under Internal Revenue Code section 3401(a) applicable to U.S. citizen employees in a state or the District of Columbia (regardless of whether the compensation paid to the individual is actually subject to federal income tax withholding, and whether or not tax is actually withheld); or
  • an individual who is a partner in a partnership or a member of a limited liability
    company or other similar structure, and includes “net earnings from self-employment”
    and “guaranteed payments for services” that are subject to self-employment tax under
    Internal Revenue Code 1401(a) as payments in connection with the performance of
    services.
13What if an Eligible Borrower chooses, at the time of disbursement of the Main Street loan, to calculate total compensation using the federal tax rules for all officers or employees that were not Significant Deferred Compensation Recipients (as defined in question H.12), and the Eligible Borrower later increases the amount of deferred compensation so that one or more of these individuals become Significant Deferred Compensation Recipients?

An Eligible Borrower must begin calculating total compensation immediately with respect to any officer or employee that becomes a Significant Deferred Compensation Recipient based on U.S. GAAP, and continue doing so for the remaining period that the Main Street loan is outstanding and for 12 months thereafter. In such cases, the Eligible Borrower must include in any such officer’s or employee’s total compensation calculated any deferred compensation that was granted but not paid in the preceding 90-day period. An Eligible Borrower that meets the criteria (i.e., had gross revenues for its financial year ending in 2019 of less than or equal to $10,000,000) at the time of loan disbursement and chooses to use the federal tax rules to calculate total compensation is not required to use for any employee or officer that is or becomes a Significant Deferred Compensation Recipient at any time, unless it becomes a public company.

14What if an Eligible Borrower that has chosen to calculate total compensation using the federal tax rules (as permitted by question H.12) later becomes a public company?

Any Eligible Borrower that becomes a public company must calculate total compensation. With respect to any officer or employee whose total compensation had been calculated in a manner consistent with the federal tax rules, the Eligible Borrower must begin calculating such individual’s total compensation under item immediately upon becoming a public company, and must include in their total compensation any deferred compensation granted but not paid in the 90-day period ending when the Eligible Borrower became a public company

15Is a tribal business prohibited from paying dividends or making other capital distributions to a tribal government owner under the covenant in section 2.D of the Borrower Certifications and Covenants?

Dividends or other capital distributions paid by tribal businesses provide a vital source of revenue for tribal governments and thereby support the self-sufficiency of the tribe and the provision of social services. The Secretary has exercised his authority under section 4003(c)(3)(A) of the CARES Act to grant a waiver from the dividend prohibition in section 4003(c)(3)(A) of the CARES Act to permit a tribal business, the ownership interests of which are wholly or majority owned by one or more tribal governments, to pay dividends or make equivalent capital distributions to its tribal government owners. The term “tribal government” as used in this FAQ refers to a federally or state recognized Indian tribe and does not include Alaska Native corporations. A tribal business with ownership interests that are held by individuals or investors other than the tribal government may pay dividends or make equivalent capital distributions to its tribal government owner(s), but remains subject to the prohibition on payment of dividends and other capital distributions with respect to ownership interests held by individuals or investors other than a tribal government. However, a tribal business that is organized as an S corporation or other tax pass-through entity is permitted to pay dividends or make other capital distributions to non-tribal government owners, to the extent reasonably required to cover the owners’ tax obligations in respect of the company’s earnings.

A tribal business, the ownership interests of which are wholly or majority owned by one or more tribal governments, should consider this FAQ incorporated by reference into the MSNLF, MSPLF, or MSELF Borrower Certifications and Covenants and may rely on this FAQ in relation to covenants required by section 2.D of each Borrower Certifications and Covenants document.

For the avoidance of doubt, transfers from tribal economic enterprises that do not have a distinct legal personality to the related tribal government are not considered dividends and are permitted, subject to the terms of the loan agreement

16How should an Eligible Borrower that is organized as a partnership, limited liability company, S corporation, or similar tax pass-through entity comply with restrictions on compensation and capital distributions under the direct loan restrictions with respect to payments made to owners of the Eligible Borrower?

All Eligible Borrowers must commit to comply with the repurchase, capital distribution, and compensation restrictions that apply to direct loan programs under section 4003(c)(3)(A) of the CARES Act. As described in the Borrower Certifications and Covenants, the restrictions on capital distributions apply to payments made with respect to common stock or equivalent interests in a partnership, limited liability company, business organized as a trust, or other legal entity. In addition, an Eligible Borrower is subject to limitations on compensation of any officer or employee whose total compensation exceeds $425,000.

In some cases, an employee or officer that is covered by the limitations on compensation may also be a shareholder, partner, or member of the Eligible Borrower. In complying with both sets of restrictions, the Eligible Borrower must distinguish between compensation of the employee or officer and dividends and other capital distributions paid to owners, including the employee or officer. The discussion below provides guidance on distinguishing between stock- or equity-based compensation and capital distributions paid with respect to common stock or common stock equivalents.

Corporations: Eligible Borrowers must calculate total compensation unless the Eligible Borrower meets the criteria and chooses to calculate total compensation according to the federal tax rules. Stock-based compensation, such as stock options, is included in total compensation. The award of stock-based compensation would not be considered a capital distribution and, accordingly, would not be subject to restrictions on capital distributions. However, dividend payments made on such stock of the Eligible Borrower owned by the officer or employee would be prohibited under the restrictions on capital distributions, except in the case of dividend distributions made to the owner of an S corporation that are reasonably required to cover its owners’ tax obligations in respect of the Eligible Borrower’s earnings.

Partnerships and Limited Liability Companies: As described in question H.12, Eligible Borrowers must calculate total compensation according to item 402(c) unless the Eligible Borrower meets the criteria and chooses to calculate total compensation according to the
federal tax rules. An officer or employee may receive awards in connection with the
performance of services in the form of an interest in the partnership or limited liability
company, including a capital or profits interest.21 With respect to an award of a capital or
profits interest in connection with services, the value of the award, if any, would be included in
total compensation according to the methodology described in item 402(c) or the federal tax
rules, as applicable. The award of an interest in a partnership or limited liability company
would not be considered a capital distribution and, accordingly, would not be subject to
restrictions on capital distributions. However, the Eligible Borrower would be prohibited from
making a distribution with respect to a partnership or limited liability company interest,
including a capital or profits interest, except to the extent reasonably required to cover its
owners’ tax obligations in respect of the Eligible Borrower’s earnings.

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