Federal Reserve Expands Main Street Lending Program to Include Nonprofit Organizations as Borrowers
The Federal Reserve ’s Main Street Lending Program has recently been expanded to add two potential loan options, which will enable nonprofit organizations such as educational institutions, social service organizations and hospitals to receive financial support in addition to the previously announced programs benefiting for-profit entities. As described in a press release issued by the Federal Reserve dated July 17, 2020, the two potential loan options include (i) the Nonprofit Organization New Loan Facility (“NONLF”), pursuant to which nonprofit borrowers may request new single-lender loans and (ii) the Nonprofit Organization Expanded Loan Facility (“NOELF”), which is intended to “upsize” existing term loans or revolving credit facilities of nonprofit organizations and may also apply to lenders’ interests in syndicated loan facilities. Term sheets for the NONLF and NOELF were released by the Federal Reserve (through the Federal Reserve Bank of Boston, which is implementing the program) (the “Federal Reserve”) on July 17, 2020. Following that release, the Federal Reserve published on July 23, 2020 its initial Frequently Asked Questions document relating to those facilities (the “Nonprofit Businesses’ FAQ”).
The NONLF and NOELF are not yet operational, but the launch date is expected to be announced soon. The Federal Reserve is working to create the infrastructure, including legal documents and certifications, necessary to make the nonprofit facilities fully operational. The key terms of the NONLF and NOELF are provided below:
The initial Nonprofit Businesses’ FAQ includes the following relevant information:
1. Structure and Overview. Many business sectors have faced financial hardship in the wake of the COVID19 pandemic, including the nonprofit sector, whose services and assistance are at a heightened demand. The Federal Reserve has resolved to expand the Main Street Lending Program to include financings to small and medium-sized nonprofit organizations that were in sound financial condition prior to the onset of the COVID-19 pandemic. The Federal Reserve has confirmed that the Main Street Lending Program would be effectuated only through eligible lenders with respect to nonprofit businesses (similar to the forprofit businesses under the program), and no direct loans from the Federal Reserve will occur. The Federal Reserve further confirms that unlike the Paycheck Protection Program (“PPP”), the Main Street Lending Program will not contain any form of loan forgiveness (other than reductions in interest, extensions of repayment schedules or similar relief in the event of a restructuring or workout scenario) for nonprofit business participants.
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