CHICAGO: 312 332 7555 SCHAUMBURG: 847 705 7555
Blog Post
Banking and Business Monthly – May 2020
Steven A. Migala • May 11, 2020
FEDERAL RESERVE EXPANDS AND PROVIDES ADDITIONAL GUIDANCE REGARDING ITS MAIN STREET LENDING PROGRAM
On April 30, 2020, the Federal Reserve Board (Fed) announced
an expansion of the scope of its previously announced Main Street Lending Program (Program) and published
additional guidance in the form of Frequently Asked Questions (FAQs). The April 30 updates are reflected in revised term sheets for each of now three distinct facilities comprising the Main Street Lending Program and the FAQs. The Fed has not yet published details relating to loan participation terms, credit administration or loan servicing, and has not yet announced an official launch date for the Main Street Lending Program. The changes to the Program include (a) creating a third loan option, with increased risk sharing by lenders for borrowers with greater leverage, (b) lowering the minimum loan size for certain loans to $500,000; and (c) expanding the pool of businesses eligible to borrow.
The Program is referred to under Title IV of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) and is designed to provide support to small and medium-sized businesses that were in a sound financial position prior to the COVID-19 pandemic. The Program will provide this support through the Federal Reserve’s purchase of up to $600 billion in participations in loans to “Eligible Borrowers” from “Eligible Lenders.”
Among the changes are that businesses with up to 15,000 employees or up to $5 billion in annual revenue are now eligible, compared to the initial program terms, which were for companies with up to 10,000 employees and $2.5 billion in revenue. However, the Federal Reserve has indicated that employees should be counted in accordance with the Small Business Administration (SBA) rules applicable to the Paycheck Protection Program (PPP), and that for purposes of calculating the number of employees and annual revenues, a business must include all of its affiliates as determined in accordance with those rules. This requirement will exclude many private equity-owned businesses, though the increased size tests may allow for some to qualify even on such a combined basis. The minimum loan size for two of the options was also lowered to $500,000 from $1 million. The Fed also clarified that eligible borrowers include businesses that have received PPP loans.
With the changes, the program will now offer more options to a wider set of eligible small and medium-size businesses. The U.S. Treasury will provide $75 billion for the program using funds from the CARES Act. Below is a chart summarizing the basic terms of each of the three loan facilities in the Program:
| Main Street Lending Program Loan Options | New Loans | Priority Loans | Expanded Loans |
|---|---|---|---|
| Term | 4 years | 4 years | 4 years |
| Minimum Loan Size | $500,000 | $500,000 | $10,000,000 |
| Maximum Loan Size | Lesser of $25 million or an amount that, when added to outstanding and undrawn available debt, does not exceed 4.0x adjusted 2019 EBITDA | Lesser of $25 million or an amount that, when added to outstanding and undrawn available debt, does not exceed 6.0x adjusted 2019 EBITDA | Lesser of $200 million, 35% of existing outstanding and undrawn available debt, or an amount that, when added to outstanding and undrawn available debt, does not exceed 6.0x adjusted 2019 EBITDA |
| Risk Retention | 5% | 15% | 5% |
| Payment (Year One Deferred for All) | Years 2-4: 33.33% each year | Years 2-4: 15%, 15%, 70% | Years 2-4: 15%, 15%, 70% |
| Rate | LIBOR + 3% | LIBOR + 3% | LIBOR + 3% |
| Collateral | Unsecured or secured (including second lien); cannot be contractually subordinated | Must be senior to or pari passu with, both as to payment and security, all other debt (other than mortgage debt) | Must be senior to or pari passu with, both as to payment and security, all other debt (other than mortgage debt) |
More News & Resources
Lavelle Law News and Events
On April 23, 2024, the Federal Trade Commission (“FTC”), in a 3-2 vote, issued its final Non-Compete Clause Rule (“Rule”) which prohibits noncompete clauses in agreements between employees and their workers. This highly anticipated Rule follows a substantially similar proposed rule from the FTC released on January 19, 2023. The Rule will not become effective until 120 days after publication in the Federal Register, and covered employers will be required to comply with the Rule by that effective date, which could come as early as August of this year. By the FTC’s estimate, this ban could affect up to one in five American workers.
When determining how to distribute the marital assets between parties to a divorce, the division of an interest in a small or medium business owned by one or both of the parties is more complex and requires a careful examination of the value of the business or business interests. The Court must determine the value of the business interest in order to determine how to equitably divide all marital assets in which the parties have an interest. The Court will regularly rely on the valuation reports of the parties' experts regarding the value of the business. The business valuation expert will utilize a number of different methods in determining the value of a business. The professional appraiser will examine and assess the value of the business and provide expert testimony and reports to the parties and the Court.
Vehicle dealerships particularly have recently found themselves needing to navigate the complex terrain of adhering to the BIPA’s stringent requirements to avoid being targeted through lawsuits. There has been a recent noticeable uptick in class action lawsuits under the BIPA, serving as a critical wake-up call for the automotive retail industry, highlighting the need for dealerships to review and enhance their practices if they are using biometric technology.
Join us for this seminar as Lavelle Law attorneys Kelly Anderson and Chance Badertscher will unpack the complexities of Illinois commercial leases in order to prepare you for strong leasing relationships.
Between the state of Illinois and federal courts, there are well over 200 statutes that deal with fee shifting provisions. They lay out ways in which legal fees may become the responsibility of one party in a lawsuit. In this video, Lavelle Law Associates Jodie Upchurch and MaryAllison Mahacek discuss ways that these provisions should be included in contracts and how they can be used advantageously.
Lavelle Law real estate attorney, Chance Badertscher, recently participated in a Straight Up Chicago Investor Podcast and shared his expertise on what to expect on the final walkthrough before your real estate closing. He breaks it down and shares tips for both the buyer and the seller.
Between the state of Illinois and federal courts, there are well over 200 statutes which deal with fee shifting provisions. They lay out ways in which legal fees may become the responsibility of one party in a lawsuit. Lavelle Law Associates Jodie Upchurch and MaryAllison Mahacek discuss ways that these provisions should be included in contracts and how they can be used advantageously.
Our team worked very quickly (in a matter of just a few days) to establish temporary guardianship of the client, and – most importantly – successfully argued for the judge to authorize the guardian to execute and finalize the estate plan documents on the client’s behalf. Finalizing the estate planning documents in advance of the client’s death saved the estate and the client’s family nearly $500,000 in estate taxes.
Businesses classified as medical spas have a variety of special considerations that must be adhered to in the state of Illinois. In this video, Lavelle Law attorney Eso Akunne discusses critical issues that must be met to operate with state laws. If you are interested in getting involved in this rapidly growing industry be sure to watch this video.
The IRS recently announced that almost 940,000 people across the nation have unclaimed refunds for tax year 2020 but face a May 17 deadline to submit their tax returns. The IRS estimates more than $1 billion in refunds remain unclaimed because people have not filed their 2020 tax returns yet. The average median refund is $932 for 2020. The IRS estimates that about 36,200 Illinois taxpayers may lose $40,608,000 in potential refunds.
STAY UP TO DATE
Subscribe to our newsletter
OUR LOCATIONS
Phone: 312 332 7555
Fax: 312 332 4611
Fax: 847 705 9960
Created by Olive + Ash.
Managed by Olive Street Design. 