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The Thomas Howell Ferguson Blog

Modifications to the Main Street Lending Program Expands Eligibility to Not-For-Profits

On Friday, July 24th, the Federal Reserve Board released modifications to the Main Street Lending Program that will provide greater access to credit for not-for-profit organizations.  The Board approved two new loan options to provide support to a broad set of not-for-profit organizations that were in sound financial condition prior to the pandemic.  The Board also eased the requirements that not-for-profits need to fulfill to participate in the Main Street Lending Program.

In order to qualify for these loans, the not-for-profit must be a tax-exempt organization as described in section 501(c)(3) or 501(c)(19) of the Internal Revenue Code.  They must also meet the following criteria:

  • Minimum of 10 employees (previously 50)
  • Total non-donation revenues equal to or greater than 60% of expenses for the period from 2017 through 2019 (previously 70% revenues)
  • 2019 operating margin of 2% or more (previously 5%)
  • Current days cash on hand 60 days (previously 90 days)
  • Current debt repayment capacity – ratio of cash, investments, and other resources to outstanding debt and certain other liabilities – of greater than 55% (previously 65%)

The Main Street not-for-profit loan terms generally mirror those for Main Street for-profit business loans, including:

  • The interest rate (LIBOR + 3%)
  • Principal and interest payment deferral (principal deferred for two years; years 3-5: 15%, 15%, and 70%)
  • Five-year term
  • Minimum and maximum loan sizes

The Main Street Lending Program was established with the approval of the Treasury Secretary and with $75 billion in equity provided by the Treasury Department from the CARES Act.

For questions, always consult a Certified Public Accountant.

Submitted by: Allison Harrell, Shareholder, Assurance Services.

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