On July 17, 2020 the Federal Reserve Board released term sheets for two new Nonprofit Organization Loan Facilities, expanding eligibility under the Main Street Lending Program to nonprofit organizations meeting certain eligibility criteria.
The Coronavirus Aid, Relief, and Economic Security Act (the CARES Act) appropriated funding to the Federal Reserve to expand the Main Street Lending Program for businesses in need of funding options in light of COVID-19 pandemic. The Main Street Lending Program was not originally available to nonprofit applicants, however on June 15, 2020, the Federal Reserve requested public feedback on a proposed expansion to the program that would provide credit to nonprofit organizations described in sections 501(c)(3) or 501(c)(19) meeting certain eligibility requirements.
Nonprofit Organization Loan Facilities
The Federal Reserve Board voted to modify the Main Street Lending Program to provide greater access to credit for nonprofit organizations such as educational institutions, hospitals and social service organizations and approved two new loan options to provide support to tax-exempt organizations described in sections 501(c)(3) or 501(c)(19).
The nonprofit loan terms generally mirror those for Main Street Lending Program for-profit business loans. Nonprofit organizations will be eligible for new loans or for the expansion of existing loans, as detailed in the term sheets issued by the Federal Reserve and summarized below.
|Main Street Lending Program Nonprofit Loan Options
||Nonprofit New Loans
||Nonprofit Expanded Loans
|Minimum Loan Size
|Years in Operation
||Minimum 5 years
||· Exempt from federal income tax under section 501(c)(3) or 501(c)(19)
· Minimum 10 employees
· Total non-donation revenues equal to or greater than 60% of expenses for the period from 2017 through 2019
· 2019 operating margin of at least 2%
· Current days cash on hand 60 days
· Current debt repayment capacity greater than 55%
· See term sheets for additional detail
|Maximum Loan Size
||Lesser of $35 Million or borrower’s avg. 2019 quarterly revenue
||Lesser of $300 Million or borrower’s avg. 2019 quarterly revenue
||Principal deferred two years
Interest deferred one year
||LIBOR + 3%