THE END OF THE MAIN STREET LENDING PROGRAM; ALTERNATIVE FINANCING OPTIONS

January 07, 2021

In order to allow more time to process and fund loans that were submitted to the Main Street lender portal, the Federal Reserve Board on Tuesday extended the termination date of the Main Street Lending Program facilities to January 8, 2021. The extended delay is due to the huge influx of Main Street Loan Facility applications that came in just before 2020 year-end. Indeed, during the months of July through November 2020, participating lenders reported Main Street Loan Facility figures totaling just $6.3 billion; and yet just before terminating the program, applications had reached $14.5B.

When the pandemic crisis hit, the Fed stepped in as a lender to the banking system, creating programs like the Main Street Lending Program that Sassoon Cymrot Law helped our clients navigate and participate in. The Main Street Loan Facilities carry a rate of 3 percentage points above short-term interbank lending rates and have five-year terms. They allow borrowers to delay principal payments for two years and interest payments for the first year, with accrued and unpaid interest being capitalized and added to the principal at the end of the first year of the loan.

Although the Main Street Lending Program has not been renewed for 2021, the need for financing is still vital for businesses who did not make the Main Street Loan Program, but who still need similar pandemic relief financing. There are alternatives for small businesses to consider if they need capital during the pandemic.

Banking and Finance attorney, Devon Kinnard works with clients from a variety of industries to secure financing through SBA Programs and has this advice:

1. Watch for the SBA’s PPP (Round 2) Announcement and apply. We expect this to happen any day and you should be ready. If you already have applied, your application will receive priority, but reach out to your SBA Approved lenders and make sure your paperwork is in order now.

2. Contact your lender and ask about alternative SBA Loans such as a 7a Loan, a favored small business financing option, or 504 Loan, which is made available through Certified Development Companies (CDCs).

3. Ask your lender about non-SBA traditional loans. There are terrific local lenders who work hard to structure favorable terms, fees and requirements. With local, community-based banks and credit unions, you’re likely to get the best interest rates in the current pandemic environment.

If you already have proven business success and solid business financials (and can send continued proof of your business’ health on a regular basis), you can get funding in just a couple of days with a business line of credit. Instead of predicting your funding needs in order to qualify for a large lump sum, a small business line of credit allows you to use your credit limit as needed. It also generally offers lower interest rates and better repayment terms than credit cards -– you only pay interest on the funds you take out.