Central Bank Proposes Allowing Nonprofits to Access Credit from Lending Facilities

Chris Gaetano
Published Date:
Jun 16, 2020
The Federal Reserve has proposed expanding the Main Street Lending Program to include certain nonprofit organizations. Participating nonprofits would face loan terms identical to the ones being offered to for-profit companies. As with for-profit businesses, 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. Borrower eligibility requirements, however, are different due to their being nonprofits. Under the proposal, an eligible borrower is one that has:

* At least 50 employees;
* No more than 15,000 employees or had less than $5 billion in revenue in 2019;
*  An endowment no larger than $3 billion;
* Less than 30 percent of its revenue as donations;
* A ratio of adjusted 2019 earnings before interest, depreciation, and amortization (EBIDA) to unrestricted 2019 operating revenue, greater than or equal to 5 percent;
* A ratio (expressed as a number of days) of (i) liquid assets at the time of loan origination to (ii) average daily expenses over the previous year, equal to or greater than 90 days;
* At the time of loan origination, a ratio of (i) unrestricted cash and investments to (ii) existing outstanding and undrawn available debt, plus the amount of any loan under the Facility, plus the amount of any Centers for Medicare & Medicaid Services (CMS) Accelerated and Advance Payments, that is greater than 65 percent;
* Significant operations in, and the majority of its employees inside, the U.S, as well as hving been creaed under the laws of the U.S.
* No participation in the Nonprofit Organization Expanded Loan Facility (NOELF), the Main Street New Loan Facility (MSNLF), the Main Street Priority Loan Facility (MSPLF), the Main Street Expanded Loan Facility (MSELF), the Primary Market Corporate Credit Facility, or the Municipal Liquidity Facility; and
* No specific support pursuant to the Coronavirus Economic Stabilization Act of 2020 (Subtitle A of Title IV of the CARES Act).

"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. "Nonprofits provide vital services across the country and we are working to help them through this difficult time."

Members of the public have until June 22 to send their comments.

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