The Federal Reserve Board (Fed) announced on June 15 that it is seeking public input on a proposed expansion of the Main Street Loan Program (MSLP) to enable nonprofit organizations access to capital to help them address pandemic-related liquidity challenges.
The program for small and mid-sized employers was created by the Coronavirus Aid, Recovery, and Economic Stimulus (CARES) Act and enables borrowers to take out new loans or expand existing loans at low interest rates, provided they meet eligibility criteria. The Fed’s proposal contains modifications to reflect the operational and accounting practices of nonprofits, including:
- A minimum of 50 and maximum of 15,000 employees
- Financial thresholds based on operating performance, liquidity, and ability to repay the loan
- An operational history of at least five years
- A $3 billion limit on endowments
In the proposal, the minimum loan size is $250,000 and the maximum is $300 million. Principal payments would be fully deferred for the first two years of the loan, and interest payments deferred for one year. Nonprofits would need to be tax-exempt under Internal Revenue Code sections 501(c)(3) or 501(c)(19). Private colleges and universities and public institutions that have obtained 501(c)(3) status from the IRS would be eligible. The Fed notes that there may be other nonprofit organizations that might be eligible, but it appears that the proposal does not generally include all public colleges and universities.
NACUBO joined several other higher education associations in making recommendations to the expanded program for nonprofits, including:
- Expansion of MSLP loan eligibility to public colleges and universities
- Clarifications to the formulas for calculating certain eligibility requirements related to revenue from donations
- Overall expansion of eligibility thresholds to enable all colleges and universities to access the MSLP facility
- Easing of the proposed terms (lower interest rate, longer repayment period)
Final guidance and terms for the nonprofit MSLP are expected in the coming weeks.