On Monday, June 15, 2020, the Federal Reserve Board announced it will be seeking public feedback on a proposal to expand its Main Street Lending Program to provide access to credit for nonprofit organizations. As with the existing Main Street Lending Program, which targets small and medium-sized businesses, the proposed expansion would offer loans to small and medium-sized nonprofits that were in sound financial condition before the coronavirus pandemic and could benefit from additional liquidity to manage through this challenging period. See the full press release, here.
Loan terms under the proposed Main Street nonprofit loans, including the interest rate, deferral of principal and interest payments, and five-year term, are the same as for Main Street business loans. The minimum loan size is $250,000 while the maximum loan size is $300 million. Principal payments would be fully deferred for the first two years of the loan, and interest payments would be deferred for one year. Two loan options would be offered under the proposal. Borrower eligibility requirements for the proposed nonprofit facilities would be modified from the for-profit facilities to reflect the operational and accounting practices of the nonprofit sector and include:
- Minimum of 50 and a maximum of 15,000 employees.
- Financial thresholds based on operating performance, liquidity, and ability to repay debt.
- An operational history of at least five years.
- And a limit on endowments of no more than $3 billion.
Additionally, each organization must be a tax-exempt organization under section 501(c)(3) or 501(c)(19) of the Internal Revenue Code. The chart below has additional details on the proposed terms:
For more information on the draft terms for the Nonprofit Organization New Loan Facility, click here.
For additional information on the draft term sheet for the Nonprofit Organization Expanded Loan Facility, click here.
These draft term sheets are open to public comment until Monday, June 22.
As always, The Bonadio Group is here to help guide you through this process and ensure you maximize your debt forgiveness. Click here to get in touch with us for assistance today.
The information and advice we are providing for this matter relates to COVID-19 legislative relief measures. Because legislative efforts are still ongoing, we expect that there may be additional guidance and clarification from regulators that could modify some of the advice and information provided to you, after the conclusion of our engagement. We, therefore, make no warranties, expressed or implied, on the services provided hereunder.