The Federal Reserve has released details of the Main Street Lending Program, including the terms of the lending facilities. The Program will provide four-year loans for small and mid-size businesses with up to 10,000 employees or with 2019 revenues under $2.5 billion. Payments will be deferred for one year. The term sheet did not specify if these businesses include non-profits.
Businesses applying for loans must make efforts to maintain workforce and payroll, and follow compensation, stock repurchase, and dividend restrictions that apply to direct loan programs under the Coronavirus Aid, Relief, and Economic Security (CARES) Act. During the period of the loan through one-year post-repayment, no employee whose compensation exceeds $425,000 in 2019 may receive a pay raise over the 2019 amount or severance that exceeds twice the 2019 amount. Additionally, an employee whose total annual compensation exceeds $3 million will be capped at $3 million plus 50% of any compensation in excess of $3 million during this period.
GNYHA is consulting with Sullivan Cotter to understand the implications of the executive compensation provisions for our members. Businesses that have received loans through the Paycheck Protection Program are also eligible for Main Street loans, although the term sheet does not specify whether the same affiliation rules apply.
Eligible lenders include US insured depository institutions, US bank holding companies, and US savings and loan holding companies. Lenders may originate new loans or use Main Street loans to increase the size of existing loans, and will retain a 5% share and sell the remaining 95% to a Federal Reserve special purpose vehicle (SPV), which will purchase up to $600 billion of aggregate loans. The Department of the Treasury will make a $75 billion equity investment in the SPV using funds appropriated under the CARES Act. The minimum loan size for both the new and expanded loan facilities is $1 million, and the maximum depends on factors specific to the borrower. Further details of the program can be found on the Federal Reserve website, including the term sheets for both new and expanded loan facilities.
As the program is being finalized, the Federal Reserve seeks input from stakeholders until April 16. GNYHA will urge the Treasury Department and the Federal Reserve to allow non-profit and public hospitals to apply for the Main Street loans.
GNYHA has updated its list of financial resources for hospitals during the COVID-19 emergency to include the details of the Main Street Lending Program. We will update this document on a regular basis as we learn of new COVID-19-related funding opportunities or additional details on existing opportunities.