Fed Main Street Loan Facilities Extended until December 31, 2020 and Expanded to Nonprofits
On July 17, 2020, the Federal Reserve Bank of Boston released updated terms sheets for two types of loan facilities for nonprofits under the Main Street Lending Program (“MSLP”). Similar to the for-profit facilities, the Nonprofit Organization New Loan Facility (“NONLF”) and Nonprofit Organization Expanded Loan Facility (“NOELF”) are available to organizations which were in sound financial condition before the COVID-19 pandemic. However, a number of eligibility adjustments have been made to accommodate differences in how nonprofits may operate.
The NONLF and NOELF provide long term loans to 501(c)(3) and 501(c)(19) nonprofits in continuous operation since January 1, 2015. The program is designed for small or medium sized nonprofits, measured as either (i) up to 15,000 employees or (ii) up to $5 billion in 2019 revenue. Additionally, eligible nonprofits cannot have an endowment of $3 billion or more.
A number of changes were made to the nonprofit terms sheets originally proposed on June 16, 2020, including loosening restrictions on eligibility. Key eligibility criteria now require that the organization must have:
- At least 10 employees (reduced from 50 in the proposed terms);
- Non-donation revenue equal to or greater than 60% of its expenses from 2017-2019 (a new requirement not included in the proposed terms);
- An adjusted 2019 EBIDA to operating revenue ratio of 2% of greater (reduced from 5% in the proposed terms);
- Liquid assets sufficient to meet its average daily expenses over the previous year for 60 days (decreased from 90 days in the proposed terms); and
- A ratio of unrestricted cash and investments to existing undrawn debt and certain other liabilities of greater than 55% (decreased from 65% in the proposed terms).
The maximum loan size for Main Street nonprofit loans are the lesser of (i) $35 million for new loans, or $300 million for expanded loans; or (ii) the organization’s average 2019 quarterly revenue.
Mirroring the for-profit Main Street Lending Program facilities, borrowers may only utilize one of NONLF or NOELF and may not also participate in the Primary Market Corporate Credit facility or Municipal Liquidity Facility, but may have received a Paycheck Protection Program or Economic Injury Disaster Loan. Similarly, borrowers may not use the proceeds to repay other debt before it is due or reduce existing lines of credit.
On July 23rd the Boston Fed released Frequently Asked Questions for the Main Street Nonprofit Lending Facility. Among other clarifications, the nonprofit FAQs provide guidance related to calculation of total and average daily expenses and operating revenue specific to nonprofits. The FAQs also clarify that organizations like public hospitals and public colleges, although tax exempt under a different tax code provision than 501(c)(3), may still be eligible for the facilities if they determine that they could qualify as a 501(c)(3) organization.
The Federal Reserve Board announced on July 28, 2020 that the Main Street Lending Program facilities for for-profit and nonprofit companies would be extended to December 31, 2020, from the originally slated program end date of September 30, 2020. The Fed stated that the extension is intended to enable its continued assistance in economic recovery from the COVID-19 pandemic.
Foley assists clients in navigating the requirements of the Main Street loan facilities and other COVID-19 financing efforts. For more information, contact your Foley relationship partner or the authors listed below. Foley’s here to help our clients effectively address the short- and long-term impacts on their business interests, operations, and objectives. Foley provides insights and strategies across multiple industries and disciplines to provide timely perspective on the wide range of legal and business challenges that companies face conducting business while dealing with the impact of the coronavirus. Click here to stay up to date and ahead of the curve with our key publications addressing today’s challenges and tomorrow’s opportunities. To receive this content directly in your inbox, click here and submit the form.
