Nonprofit organizations, including colleges and universities, cannot participate in the Main Street Lending Program created by Congress during the coronavirus crisis, new guidance from the Federal Reserve Board stipulates.
The loans were created under the Coronavirus Aid, Relief, and Economic Security (CARES) Act and are intended for small- and mid-size employers. While nonprofits are excluded, the Federal Reserve Board’s April 30 announcement states that "[t]he Board recognizes the critical role that nonprofit organizations play throughout the economy and is evaluating a separate approach to meet their unique needs." NACUBO is currently advocating for colleges and universities to have access to Main Street loans and other programs.
The guidance offers additional background in Question #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.