Updated: Aug 13, 2020
"If I'd have had more time, I'd have written a shorter letter" ~Blaise Pascal
As we have discussed in prior notes, one of the principals of surviving a crisis as an entrepreneur is to have a “Fortress Balance Sheet.” Excess cash and liquidity can help your company through all kinds of challenges like those presented by the current COVID-19 pandemic. While the initial lending program, including PPP lending, has been largely exhausted, another, lesser-known program, the “Main Street Lending Program,” was recently finalized and is now in effect. While this program targets a much narrower band of applicants, many of you may find value in exploring this option. Here, we’ve tried to summarize some of the key points.
First and foremost, as with most things today, the program is still being defined and key questions about implementation remain. The summary below is our best judgment about what we know at this time. We encourage you to check with your attorneys, CPAs, and financial advisors for additional insights.
MSLP is not an entitlement program. These are loans, and they must be paid back.
If your business has been badly hit by COVID-19, your best chance for an MSLP loan will be your current banking relationships.
If you are looking to use the loan to grow, more banks will be open to you, though plan on moving your banking relationships to the provider bank.
The program was live as of July 21 and is currently set to expire on September 30. Thus, if you are interested, you should move quickly.
$600B has been reserved for the program, so far.
Your business must have been established prior to March 13, 2020
Your business must have less than 15,000 employees and less than $5B in revenue
Your business must have been created or organized in the United States with significant operations and a majority of the employees in the U.S. (there are some allowances for affiliates of foreign companies…consult your lender)
Most for-profit entity types are allowed
Developers and landlords, as well as certain other unique businesses, are NOT eligible
Are either a secured or unsecured loan
Principal payments deferred for two years, and interest payments deferred for one year (unpaid interest will be capitalized)
Rates based on 1 or 3 month LIBOR plus 3%
Prepayments are permitted without penalty
Loans are available in amounts from $250K-$50M. (Due to the complexity of the application process, Ami suggested not to apply if your loan need was less than $1M)
Loans are generally limited to four times (for certain loans, six times) 2019 EBITDA minus existing debt.
Fees are 1-2%
There is an expanded facility with limits from $10M-$300M and details on these are available from a lender.
It is important to note that if you have an existing lender, they must be willing to share their rights with the new lender.
As with any government pram, there is a myriad of additional requirements and restrictions which are beyond the scope of this note.
If this might be of interest, feel free to contact your banking relationship.
You can consult the Federal Reserve website at https://www.federalreserve.gov/monetarypolicy/mainstreetlending.htm.
You can also contact Ami at www.Multifunding.com
Make it a great day!
The information contained within is the view and opinion of the author as of the date it was written, and not necessarily of Cascade Financial Management, Inc. Such views are subject to change without notice. Cascade has no duty or obligation to update the information contained herein.
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