Washington Update

Nonprofit Organizations Excluded From Main Street Lending Program – For Now

May 01, 2020

The Federal Reserve has published initial guidance outlining the parameters of the planned $2.3 trillion Main Street Lending Program. The program is designed to support lending to small and medium-sized businesses - defined as maintaining fewer than 15,000 employees or generating less than $5 billion in annual revenues - that were in sound financial condition before the onset of the COVID-19 pandemic.

While there was speculation that nonprofit organizations would qualify to participate in the lending programs, the guidance explicitly states that nonprofits are not currently eligible. However, the Federal Reserve does welcome the possibility for the future eligibility of nonprofit organizations should proper evaluation criteria be developed:
  • Main Street Lending Program Frequently Asked Questions, Page 12-13
  • E.6. Are non-profit organizations eligible to borrow under the Program?
  • While non-profit organizations are not currently eligible under the Program, the Federal Reserve acknowledges the unique needs of non-profit organizations, many of which are on the front lines providing critical services and research to fight the pandemic. EBITDA is the key underwriting metric required for the MSNLF, MSPLF, and MSELF. The Federal Reserve recognizes that the credit risk of non-profit organizations, as a matter of practice, is generally not evaluated on the basis of EBITDA. The Federal Reserve and the Treasury Department will be evaluating the feasibility of adjusting the borrower eligibility criteria and loan eligibility metrics of the Program for such organizations.

The Federal Reserve has also begun outreach to college and university leaders regarding the usage of appropriate metrics to evaluate the creditworthiness of institutions of higher education.

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