Main Street Lending Program Open to Nonprofits
July 30, 2020

Last week, the Federal Reserve announced that nonprofit organizations now may apply for loans under the $600-billion Main Street Lending Program. Previously open only to for-profit businesses with more than 100 employees, the program offers low-interest loans with relatively relaxed repayment terms. If your organization needs funding to keep operating during this difficult period, a Main Street loan may be an option.

The Basics

Initially, the Main Street program offered loans through three credit facilities but has added two more specifically for nonprofits: Nonprofit Organization New Loan Facility and Nonprofit Expanded Loan Facility. The difference between the two is that the Expanded Facility makes larger loans to qualified applicants, such as universities and hospitals.

Eligible banks accept applications and extend loans, but the Fed takes a 95% stake in them. Like the Paycheck Protection Act, Main Street is funded in part by CARES Act funds. It is designed to help keep organizations operating and able to retain and hire employees.

Rules for Applicants

To qualify for a Main Street loan, nonprofit organizations must be tax exempt and have:

  • A minimum of 10 employees,
  • Been in operation for at least five years,
  • Less than a $3-billion endowment,
  • Total non-donation revenues equal to 60% of expenses or more, 2017 through 2019,
  • 2019 operating margin of 2% or more,
  • Cash on hand for 60 days,
  • A debt repayment capacity of greater than 55%.

Loans have a five-year term and interest rate of LIBOR plus 3%. Interest payments are deferred for one year. Loan size depends, of course, on the size and financial health of your nonprofit, but amounts generally run from $250,000 to $300 million.

Right for You?

Even if your nonprofit has never taken out a loan, it may be necessary now during the COVID-19 crisis. But you’ll need to think carefully about your nonprofit’s ability to repay any loan. We can help evaluate your creditworthiness and repayment capacity. We can also suggest alternate funding options, including other loan programs. Contact us.

© 2020

You might also like

The Audit Is Over. Now What?

The Audit Is Over. Now What?

Whew! That’s probably your reaction when outside experts announce that their audit of your nonprofit is complete. But even if auditors have left your premises and returned the documents they’ve reviewed, the work isn’t really over. Not only do your executive director...

read more
The FLSA Asks Your Nonprofit to Accurately Classify Staffers

The FLSA Asks Your Nonprofit to Accurately Classify Staffers

Are your nonprofit’s staffers employees or independent contractors? It’s an important question because under the Fair Labor Standards Act (FLSA), misclassifying workers can lead to penalties and other costs. If you haven’t reviewed your staffers’ status since the...

read more
Lost Your Tax-Exempt Status? Here’s How to Regain It

Lost Your Tax-Exempt Status? Here’s How to Regain It

So you forgot to file your nonprofit’s Form 990, 990-EZ or 990-N with the IRS. It can happen — particularly with newer organizations that are still trying to get a handle on all the financial and regulatory requirements of running a nonprofit. However, if you forget...

read more