On September 4, 2020, the Board of Governors of the Federal Reserve System (the “Fed”) announced that the Main Street Lending Program (MSLP) is now accepting eligible loans to nonprofit organizations from lenders registered on the Main Street Lender. Portal, which can be found here.

The MSLP has been accepting eligible loans from for-profit businesses since July 6, 2020. For a detailed description of the MSLP, see our previous alert here. On July 17, 2020, the Fed announced that the MSLP would be extended to a wide range of nonprofits.

Recognizing the essential services provided by many nonprofit organizations (such as educational institutions, hospitals, and social service organizations) and in light of the millions of Americans employed by these nonprofit organizations, the MSLP offers two loan facility options to borrowers from qualifying non-profit organizations. The new Nonprofit Loan Facility or “NONLF” and the Extended Nonprofit Loan Facility or “NOELF” include many of the same terms applicable to commercial for-profit borrowers under the MSLP ( including interest rate, principal and interest payment deferral, five-year term and minimum and maximum loan amounts).

However, as noted in the MSLP Term Sheets for the NONLF and CHRISTMAS, a number of different eligibility standards based on the operating models of nonprofit organizations must be met to be eligible for the MSLP. Among these requirements, an eligible borrower must establish a tax-exempt organization described in Section 501 (c) (3) of the Internal Revenue Code (relating to charitable, educational, scientific, religious, literary, etc.) or a veteran organization described in section 501 (c) (19) of the Internal Revenue Code.

Additional qualification standards for borrowers from nonprofits have been set by the Fed, as shown in the following table:

Main Street Loan Program Loan Options for Nonprofits

NONLF

CHRISTMAS

Term

5 years

Minimum loan size

$ 250,000

$ 10 million

Endowment limit

$ 3 billion

Years of operation

At least 5 years

Eligibility criteria
(See the Term Sheets for
More details)

  • Total income excluding donations equal to or greater than 60% of expenses for the period from 2017 to 2019
  • 2019 operating margin of 2% or more
  • Current days at checkout 60 days
  • Current debt repayment capacity (ratio of cash, investments and other resources to outstanding debt and certain other liabilities) greater than 55%

Maximum loan size

The lesser of $ 35 million, or the borrower’s average quarterly income in 2019

The lesser of $ 300 million or the borrower’s average quarterly income in 2019

Risk retention

5%

Principal reimbursement

Principal postponed for two years; 3-5 years: 15%, 15%, 70%

Interest payments

Deferred for one year

Rate

LIBOR + 3%


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