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Main Street Loan Program Update
By Staci E. Rosche
Editor's Note: The following is an interpretation of the Main Street Lending Program based on information available through May 5. SFNet has been influential in raising issues of importance to our members with the Federal Reserve, some of which have been addressed. We recognize the MSLP poses additional challenges and we are seeking further clarifications. The SFNet Advocacy Committee is closely monitoring developments here and will relay updates to the SFNet community through TSL and an informative Crucial Conversation Webinar to be held prior to implementation.
On April 30, 2020, the Federal Reserve updated its Main Street Loan Program (“MSLP”) terms based on thousands of comments (including comments from Secured Finance Network) submitted since the program was initially announced on April 9, 2020. Several important updates were made to the MSLP, though many changes of interest to asset-based lenders were contemplated but not fully developed in this new guidance.[1] In particular, asset-based lenders will likely need to consider the impact of MSLP terms described below on existing financing structures, such as the pari passu treatment of collateral, which could dilute existing lender security in some cases, the continued reliance on EBITDA and risk ratings as metrics for determining borrower eligibility and the restrictions on assignments by MSLP lenders.
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