On July 17th, 2020, the Federal Reserve Board modified the Main Street Lending Program (Program) to provide greater credit opportunities to nonprofit organizations. The Program offers loans to businesses that were in sound financial condition before the Covid-19 pandemic hit. The new regulations allow a wider range of nonprofit entities such as educational institutions, hospitals, and social service organizations to apply for loans that previously only small to medium-sized for-profit businesses could access.
The program now offers two new loan options to nonprofit organizations; Nonprofit New Loans, which stretch from $250,000 to a maximum of $35 million and Nonprofit Expanded Loans, which can be between $10 million and $300 million.
The nonprofit loan terms largely mirror the existing terms for for-profit business loans including the interest rate, principal and interest payment deferral, five-year term, and minimum and maximum loan sizes.
The following modifications were made to the nonprofit loan terms:
- The minimum employee provision for nonprofits was reduced from 50 to 10, allowing smaller organizations to participate.
- The revenue provision was modified to give access to nonprofits with non-donation revenues equal to or greater than 60% of expenses from 2017-2019, a reduction from the 70% proposed in June.
- The 2019 operating margin was reduced from 5% or more to 2% or more.
- The current days cash on hand was reduced from 90 days to 60 days.
- The Current debt repayment capacity- ratio of cash, investments, and other resources to outstanding debt and certain other liabilities- of greater than 55%.
These modifications provide financial relief to a greater number of nonprofits amidst the pandemic. To learn more about the Main Street Lending Program or to determine if your nonprofit can capitalize on these new regulations, contact a BrownWinick Attorney.