In This Issue:
- SBA's New $600 Billion Main Street Lending Program
- Links and Webinars on Topical Content
- Disaster Relief Efforts in Our Industry
SBA's New $600 Billion Main Street Lending Program
On April 9, 2020, the Federal Reserve announced several extraordinary measures to support the national economy during COVID-19. Among these is the Main Street Lending Program, which will enable up to $600 billion in loans to small and medium-sized businesses. The Main Street Lending Program is, in addition to the Paycheck Protection Program, administered by the Small Business Administration. Key details of the Main Street Lending Program are set forth below.
Who Qualifies?
The Main Street Lending Program will provide support for small and mid-sized businesses that were in good financial standing before the crisis; insolvent companies are ineligible. Borrowers may have up to 10,000 employees or annual revenues of less than $2.5 billion. Borrowers must be U.S. businesses with significant operations and a majority of employees in the U.S.
What Are the Loan Terms?
The program will offer four-year loans with principal and interest payments deferred for one year. There is no prepayment penalty.
Is the Program Only for New Loans?
No. The program will allow for new Main Street loans or increases in the size of existing loans to businesses.
What Is the Loan Size?
For new loans, at least $1 million, up to the lesser of (1) $25 million or (2) an amount that, when added to existing outstanding and committed but undrawn debt, does not exceed four times the borrower's 2019 EBITDA.
For expanded loans (originated before April 8, 2020), at least $1 million, up to the lesser of (1) $150 million; (2) 30 percent of outstanding and committed but undrawn debt; or (3) an amount that, when added to existing outstanding and committed but undrawn debt, does not exceed six times 2019 EBITDA.
Can a Main Street Loan Be Used to Pay Off Other Debt?
No. Main Street loans cannot be used to repay or refinance existing credit, and the borrower must commit to not repaying other debt of equal or lower priority (except mandatory principal payments) until the Main Street loan is paid.
Are There "Strings" Attached?
Yes. Companies seeking Main Street loans must attest that they require financing because of the exigent circumstances presented by COVID-19 and commit to making reasonable efforts to maintain payroll and retaining workers during the loan term. Borrowers must also follow compensation, stock repurchase, and dividend restrictions that apply to direct loan programs under the CARES Act.
Will the Main Street Loans By Forgiven?
No. Unlike the Paycheck Protection Program (PPP), the CARES Act does not permit forgiveness of Main Street loans.
May a Firm Apply for a Main Street Loan and a Paycheck Protection Loan?
Yes, companies that have taken advantage of the PPP may also take out Main Street loans.
Links and Webinars on Topical Content
Articles
- Amazon stops accepting new online grocery customers amid surging demand
- Freakonomics - What Happens When Everyone Stays Home to Eat?
- Grocery shopping behavior shifts into 'home-confined buying'
- How Panic Buying Has Put an Incredible Strain on Food Banks Even As the Need for Them Explodes
- U.S. food supply chain is strained as virus spreads: Read in The New York Times
- COVID-19 Stimulus: Bailout for corporate agribusiness or a lifeline for our food system?
- Agri-foodtech VCs assess Covid-19's impact on the sector and portfolios
- New Fund Coefficient Capital to Back Omnichannel Businesses
- U.S. food supply chain is strained as virus spreads: Read in The New York Times
Webinars
We recommend a webinar this week on distribution challenges for food ventures in the COVID-19 business environment:
- Hirshberg Entrepreneurship Institute - A Conversation with UNFI
Date/Time: Wednesday, April 15th at 4:30pm-5:45pm EST
John Raiche, UNFI's Executive Vice-President, Supplier Services will address supplier questions and concerns about how best to navigate the distribution and retail environment during the COVID pandemic. Key topics will include promotional impact/options, consumer demands trends experienced to date and expected in the near future, best practices for suppliers in addressing the demand surge, how best to engage distributors during this time, and more. Moderated by Bob Burke of Natural Products Consulting and Gary Hirshberg of the Hirshberg Entrepreneurship Institute.
Email info@hirshberginstitute.com for registration information.
Disaster Relief Efforts in Our Industry
Visit the links below to learn more about organizations that are working on COVID-19 relief efforts:
At Davis Wright Tremaine LLP (DWT), we are proud to have one of the largest Food & Beverage legal practices in the country, with over 40 attorneys representing food innovators, entrepreneurs, and investors at every level of the food chain, from Farm to Label.
Please contact our Food and Beverage team if we can assist you in any way in these unprecedented times.
The facts, laws, and regulations regarding COVID-19 are developing rapidly. Since the date of publication, there may be new or additional information not referenced in this advisory. Please consult with your legal counsel for guidance.
DWT will continue to provide up-to-date insights and virtual events regarding COVID-19 concerns. Our most recent insights, as well as information about recorded and upcoming virtual events, are available at www.dwt.com/COVID-19.