Should Your Business Apply for the Main Street Lending Program?
May 29, 2020
This episode is the second part of a series discussing the loan programs currently in place surrounding the COVID-19 pandemic – listen to the first episode here.
The U.S. government has taken strides in assisting small and midsize businesses that are suffering financially due to the COVID-19 pandemic. In addition to the Paycheck Protection Program (PPP) from the Small Business Administration, the Federal Reserve will be offering the Main Street Lending Program (MSLP). Although, as of publication, the MSLP hasn’t launched, you can use this time to prepare your materials, should you decide to apply.
In this episode of Deal Talk with 7MA, McGuireWoods Partner Clayton Stallbaumer and Associate Kayla McCann Marty join 7 Mile Advisors Partner Andy Johnston for an in-depth discussion on the different facets of the MSLP and what it means for lenders and borrowers alike. They explore how the loan program operates and the role the Federal Reserve plays in the lending market. (04:04) The program encourages borrowers to take on loans from eligibles ources by removing the typical credit risk associated with the loans.
Clayton and Kayla address borrower eligibility (07:09) and how interested parties should be considering the terms of restrictions, requirements, and post-loan covenants. Mainly, these rules are dependent on how your business plans to move forward – continue operations normally during the pandemic or consider a sales transaction in the future. (10:29)
They also provide insight on compensation limits (13:39), minimum requirements from the Fed, and a practical timeline for the process to take place. (17:48) Also examined in this episode are additional uses of the granted loan, for instance in acquisition transactions, and the legal consequences you may potentially face if you file for bankruptcy.
While there is no final guidance yet from the Fed, you are encouraged to consult with a qualified legal team to assess your options. (28:14) Begin taking stock of your network now and explore potential loan relationships, so once the MSLP rolls out, you can initiate the process immediately.
Links Mentioned During the Episode:
About McGuireWoods LLP:
Established in 1834, McGuireWoods is a law firm based in Richmond, Virginia. The firm’s practice areas include antitrust and trade regulation, banking and finance, commercial litigation, corporate law, data privacy and security, intellectual property, real estate, restructuring and insolvency, tax, and technology. McGuireWoods’s corporate practice assists clients in mergers, acquisitions, divestitures, joint ventures, equity and debt capital raising, public offerings, cross-border transactions, and foreign direct investments. The firm also represents funds at all points of the continuum from early-stage venture and growth capital to middle-market and control buyout funds. The firm caters to sectors like healthcare, infrastructure, retail, transportation, education, construction, food, beverage, private equity, financial services, and defense.
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Deal Talk with 7MA, a bi-weekly podcast by 7 Mile Advisors that aims to give listeners a look behind the curtain of the middle-market Mergers & Acquisitions world. 7 Mile Advisors is a middle-market M&A firm based out of Charlotte, NC, that provides investment Banking services and advise on mergers, acquisitions, and private capital transactions around the globe.