On April 30, 2020, after receiving over 2,200 comment letters, the Board of Governors of the Federal Reserve (“Federal Reserve”) published two updated term sheets and one new term sheet¹ for the Main Street Lending Program (“MSLP”), which will be funded by three Federal Reserve facilities under Section 13(3) of the Federal Reserve Act, along with FAQs that may from time to time be updated². The MSLP is intended to provide support for small and mid-sized businesses through four-year term loans (the “Main Street Loans”) from eligible lenders to eligible US businesses, which together with their affiliates, have up to 15,000 employees or revenues of up to $5 billion.

We note that several key aspects of the MSLP have changed since the initial term sheets were released and that the Federal Reserve has provided substantial guidance in detailed FAQs. Nonetheless, several ambiguities remain (e.g., how foreign affiliates will affect the determination as to whether the majority of a business’s employees are in the US). As we have seen with the PPP, programs of this nature are not immune from political pressures (e.g., subsequent guidance under the PPP placed public company borrowers in the hospitality and franchise restaurant industries, private schools and universities (and, possibly, their lenders) at risk for having obtained loans as ineligible borrowers even though the initial guidance under the PPP made these businesses eligible to apply). Potential borrowers and lenders should exercise caution, and consider risk management measures, before taking action in respect of the MSLP.

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