Overview
On July 17, the Federal Reserve finalized its plans to expand the Main Street Lending Program (MSLP or program) to certain nonprofit organizations that are tax-exempt under sections 501(c)(3) and 501(c)(19).
The final term sheets are similar to those proposed in June (see our write-up on the proposal here), but expand who is eligible for the loans to accommodate a wider range of nonprofit operating models. Namely,
- The minimum number of employees has been lowered to 10 (previously 50);
- The total non-donation revenues[1] have been eased to equal to or greater than 60% of expenses for the period from 2017 through 2019 (previously 70% of revenues);
- 2019 operating margin has been adjusted to 2% or more (previously 5%);
- Current days cash on hand has been decreased to 60 days (previously 90 days); and
- Current debt repayment capacity—ratio of cash, investments, and other resources to outstanding debt and certain other liabilities—has been adjusted to greater than 55% (previously 65%).
The maximum number of employees remains at 15,000 employees and the endowment cap is still set at $3 billion. The other loan terms under the MSLP nonprofit loans, including the interest rate, deferral of principal and interest payments, and five-year term, remain the same as proposed and are the same as for MSLP business loans. For an overview of the program's terms for for-profit businesses, click here.
The minimum loan size for the nonprofit loans remains at $250,000, while the maximum loan size is still $300 million. Principal payments are fully deferred for the first two years of the loan and interest payments are deferred for one year. Further, as proposed, two loan options are offered – one for new loans and one for expanded loans (increasing the limit of an existing term loan or revolving credit facility).
Steptoe's Exempt Organizations and Financial Services practices are here to assist nonprofit organizations wishing to apply for a MSLP loan when the program goes live.
[1] "Non-donation revenues" equal gross revenues minus donations. "Donations" include proceeds from fundraising events, federated campaigns, gifts, donor-advised funds, and funds from similar sources, but exclude (i) government grants, (ii) revenues from a supporting organization, (iii) grants from private foundations that are disbursed over the course of more than one calendar year, and (iv) any contributions of property other than money, stocks, bonds, and other securities (noncash contributions), provided such noncash contribution is not sold by the organization in a transaction unrelated to the organization's tax exempt purpose. "Expenses" equal total expenses minus depreciation, depletion, and amortization.