The Federal Reserve Board is considering expanding a $75-billion Main Street Lending Program created through the CARES Act to help small and medium sized nonprofits through the pandemic.
The proposed expansion would offer loans to small and medium-sized nonprofits that were in “sound financial condition” before the coronavirus pandemic (COVID-19) and could benefit from additional liquidity.
Loan terms under the proposed Main Street nonprofit loans, including the interest rate, deferral of principal and interest payments, and five-year term, are the same as for Main Street business loans.
The Main Street Lending Program was established with the approval of the Treasury Secretary and with $75 billion in equity provided by the Treasury Department from the CARES Act.
The minimum loan size is $250,000 while the maximum loan size is $300 million. Principal payments would be fully deferred for the first two years of the loan, and interest payments would be deferred for one year.
Two loan options would be offered under the proposal. Borrower eligibility requirements would be modified from the for-profit facilities to reflect the operational and accounting practices of the nonprofit sector. New loans would be the lesser of $35 million or the borrower’s average 2019 quarterly revenue. Expanded loans would be the lesser of $300 million, or the borrower’s average 2019 quarterly revenue.
The program would be open to nonprofits with at least 50 employees but no more than 15,000 that have operated for at least five years. It would be limited to organizations with endowments of no more than $3 billion. Financial thresholds would be based on operating performance, liquidity, and ability to repay debt.
Loans would be limited to organizations with revenue in 2019 of less than $5 billion, with less than 30 percent sourced from donations.
Each organization must be a tax-exempt organization under section 501(c)(3) or 501(c)(19) of the Internal Revenue Code.
The circumstances, structure, and needs of nonprofits vary widely so public feedback is being sought to help make the proposed program as “efficient and effective as possible.” Feedback may be submitted via email through the following link until Monday. Feedback will be made available to the public, and comments should not include confidential information.
“Nonprofit organizations are critical parts of our economy, employing millions of people, providing essential services to communities, and supporting innovation and the development of a highly skilled workforce,” Federal Reserve Chair Jerome H. Powell said in a press release. “Nonprofits provide vital services across the country and we are working to help them through this difficult time,” he said.
