On July 17, the Federal Reserve Board announced its modifications to the new Main Street Lending (MSL) Program tailored to grant small and mid-sized employers access to low-cost credit to help address pandemic-related liquidity challenges. The MSL program, originally enacted as part of the Coronavirus Aid, Recovery, and Economic Security Act (CARES) Act, enables eligible borrowers to take out new loans or expand existing loans at low interest rates.
The Federal Reserve Board initially rolled out the loan program for corporate businesses, and in June released a draft MSL program aimed at serving small to mid-sized nonprofit organizations. NACUBO joined several other higher education associations in making recommendations for the expanded program; however, the final program includes only a few minor changes.
There are two lending facilities for nonprofit borrowers: the Nonprofit Organization New Loan Facility (NONLF) and the Nonprofit Organization Expanded Loan Facility (NOELF). Eligible borrowers for both programs are defined as organizations that are exempt under either section 501(c)(3) or 501(c)(19); however, the term sheet notes that “other forms of organization may be considered for inclusion” at the discretion of the Federal Reserve.
At this time, it is unclear whether public institutions will be considered eligible. Otherwise, in order to apply for either of the MSL loans, borrowers must have:
- Been in continuous operation since January 1, 2015;
- 15,000 or fewer employers or had 2019 annual revenues of $5 billion or less;
- At least 10 employees;
- An endowment of less than $3 billion;
- 60 days cash on hand;
- 2019 operating margin of 2 percent or more; and
- Total non-donation revenues equal to or greater than 60 percent of expenses for the period from 2017 through 2019.
Non-donation revenues are defined as gross revenues minus donations. Donations include proceeds from fundraising events, federated campaigns, gifts, donor-advised funds, and funds from similar sources, but exclude government grants, revenues from a supporting organization, grants from private foundations spread out over the course of more than one calendar year, and noncash contributions that are not sold by the organization in a transaction unrelated to its exempt purpose. Expenses are defined as total expenses minus depreciation, depletion, and amortization.
Both the new and expanded loans are for a term of five years. The interest rate is LIBOR plus 3 percent, and interest payments are deferred for one year. Principal repayment may be deferred for two years, and for years three through five is 15 percent, 15 percent and 70 percent, respectively. For new loans, there is a $250,000 minimum, and the maximum is the lesser of $35 million or the borrower’s average 2019 quarterly revenue. For expanded loans, the minimum is $10 million, and the maximum is the lesser of $300 million or the borrower’s average 2019 quarterly revenue.
As Congress considers final COVID relief legislation, no further changes are anticipated to this program.
Nonprofit Organization New Loan Facility Term Sheet
Nonprofit Organization Expanded Loan Facility Term Sheet
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