Finance strategies: PPP and the Main Street Lending Program

By Tom Reems | May 05, 2020

The Small Business Administration's Payroll Protection Program (PPP) restarted on April 27 with a lurch. After exhausting its initial $349 billion of capital, the PPP program reopened with a fresh allocation of $310 billion. The new funding is expected to be fully deployed this week. Accordingly, if you did not already have an application in with a lender, get one in quickly.

At the same time, the Small Business Administration (SBA) is emphasizing the requirements that the borrower certify that current economic uncertainty makes this loan request necessary to support ongoing operations and clarified that in the SBA's opinion, it is unlikely that a public company with substantial market value and access to capital markets will be eligible. Other borrowers with access to capital have come under scrutiny and may not be eligible for the program. If a company is concerned about its prior certification, the SBA has said that it will deem a company that returns loan proceeds by May 7, 2020 as having made the certification in good faith. Borrowers looking to make use of the PPP should consult with a lawyer regarding their ability to make this certification. Finally, Treasury Secretary Steven Mnuchin announced that all loans over $2 million would be reviewed by the SBA when forgiveness is requested.

Overall, the result of this process is that companies should expect more scrutiny from lenders issuing PPP loans and should be certain that their documentation and support related to the loan are in order.

The next program: Main Street Lending

For companies not eligible for the PPP or who needed more cash or cash for broader purposes, the Federal Reserve is working hard to implement the Main Street Lending Program, which should be available by the middle of May, although banks may need more time for implementation. This program will make a very large pool of capital available for traditional lenders to make loans to companies with up to 15,000 employees or $5 billion in revenue (together with their affiliates). If your company already has a loan, your current lender will likely be the best source for a new loan under this program, and if you do not have a current loan, most lenders can help. The materials for the program raised some questions about the eligibility of companies that have loans with a group of lenders (syndicated loans) or have a loan from a non-bank lender such as a debt fund which are currently not eligible. If your company is in that category, begin planning your strategy for this program now.

The loans have some very attractive qualities:

  • For companies with existing loans that need more liquidity, your current lender may have a preference for originating a Main Street loan rather than a traditional loan because the Federal Reserve will participate between 85% and 95% in the Main Street loan, allowing the bank to give the company liquidity and protect its existing investment.
  • The loans can be as small as $500,000 or as large as $200 million, which opens the program to smaller companies as well as larger ones.
  • No interest payments for one year (interest capitalized during that period)
  • 4-year maturity
  • Interest rate of Libor plus 3.0%

There are significant other important details regarding the program and the eligibility requirements, and you should consult with a lawyer regarding your participation.

For a full description of the Main Street Lending Program, see here.

Tom Reems is an attorney at Squire Patton Boggs in Denver. For more information contact or in Denver; or,, or in Washington, D.C.

This article does not constitute legal advice and no attorney-client relationship is formed with Squire Patton Boggs by virtue of this article.