Main Street Lending Program For-Profit Businesses Frequently Asked Questions (December 29, 2020)

Summary

Issued December 29, 2020, this is the final set of Main Street Lending Program FAQs for for-profit businesses published while the Program was accepting new loans; the Program would terminate on January 8, 2021. Its three facilities, authorized by the Federal Reserve Board under section 13(3) of the Federal Reserve Act, offer five-year loans: new loans of $100,000 to $35 million (MSNLF), priority loans of $100,000 to $50 million (MSPLF) and upsized tranches of $10 million to $300 million (MSELF). In the MSNLF and MSPLF, lenders sell a 95% participation to the Main Street SPV, which will purchase up to $600 billion of participations; the Treasury Department makes a $75 billion equity investment in the SPV. Main Street loans are full-recourse loans and are not forgivable.

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Full text

This document was issued on December 29, 2020, and contains the final set of for-profit facility FAQs published when the Program was accepting new loans. Please see the Post-Termination FAQs for questions that continue to be applicable to Main Street borrowers and lenders.

Main Street Lending Program
For-Profit Businesses
Frequently Asked Questions

This document is intended to address frequently asked questions (FAQs) about the Main Street Lending Program (Main Street or Program) facilities for for-profit businesses, including the Main Street New Loan Facility (MSNLF), the Main Street Priority Loan Facility (MSPLF), and the Main Street Expanded Loan Facility (MSELF). A separate document, available here, is intended to address FAQs about Program facilities applicable to nonprofit organizations: the Nonprofit Organization New Loan Facility (NONLF) and Nonprofit Organization Expanded Loan Facility (NOELF). The Federal Reserve will periodically update these FAQs. Please check the website of the Federal Reserve Bank of Boston (FRB Boston) for new FAQs or revisions to previously issued FAQs.

The Main Street Lending Program will terminate on January 8, 2021. Please refer to FAQ L.13 for more information on the timeline for processing loans before termination.

## Table of Contents

A. Purpose and Design ... 11
- A.1. Why is the Federal Reserve establishing the Program? ... 11
- A.2. How is the Department of the Treasury supporting the Program? ... 11
- A.3. Are loans that are originated or upsized in connection with the Program forgivable? ... 11
- A.4. What are the differences between the MSNLF, the MSPLF, and the MSELF? ... 11
- A.5. How long will the Program be in effect? ... 12
- A.6. Is there a limit to the size of the Program? ... 13
- A.7. What are the differences between the Program and the Paycheck Protection Program and Primary Market Corporate Credit Facility? ... 13
- A.8. What provisions of the CARES Act apply to the Program? ... 13
- A.9. What are the conflicts of interest provisions of the CARES Act? ... 14
- A.10. Can the principal amount of loans extended under Main Street be reduced? ... 14

B. MSNLF Loans ... 15
- B.1. How does the MSNLF work? ... 15
- B.2. What are the terms of MSNLF Loans? ... 15
- B.3. What is the effect of the requirement that MSNLF Loans not be "contractually subordinated in terms of priority" to other loans or debt instruments? ... 15
- B.4. Can an Eligible Lender make an MSNLF Loan to a new customer? ... 16

C. MSPLF Loans ... 16
- C.1. How does the MSPLF work? ... 16
- C.2. What are the terms of MSPLF Loans? ... 16
- C.3. Can an Eligible Lender make an MSPLF Loan to a new customer? ... 16
- C.4. Can an Eligible Borrower use the proceeds of an MSPLF Loan to refinance its existing loans? ... 17
- C.5. What does it mean for an MSPLF Loan to be "senior to or pari passu with, in terms of priority and security, the Eligible Borrower's other loans or debt instruments, other than mortgage debt"? ... 17
- C.6. If an Eligible Borrower is using an MSPLF Loan to refinance debt it owes to a different lender, should that debt be counted in its calculation of "existing outstanding and undrawn available debt"? ... 19

D. MSELF Upsized Tranches ... 19
- D.1. How does the MSELF work? ... 19
- D.2. What are the terms of MSELF Upsized Tranches? ... 20
- D.3. Under the MSELF, can an Eligible Lender sell a participation in an upsized tranche of a loan that was originated as part of a multi-lender facility? ... 20
- D.4. Does the Eligible Lender for the MSELF Upsized Tranche need to have been the lender that originated the underlying loan? ... 21
- D.5. If an existing multi-lender facility loan does not have an "opening" or "accordion" clause, can it still be eligible for upsizing under the MSELF? ... 21
- D.6. What requirements exist for the loan underlying an MSELF Upsized Tranche? ... 21
- D.7. Why is the minimum loan size for an MSELF Upsized Tranche $10 million, rather than $100,000 in the MSNLF and the MSPLF? ... 22
- D.8. Can the Eligible Lender that sells a participation to the Main Street SPV share its 5% retention of the MSELF Upsized Tranche with other members of a multi-lender facility? ... 22
- D.9. What if no EBITDA methodology was used when originating or amending the loan underlying an MSELF Upsized Tranche? ... 22
- D.10. How can the "pass" criterion be satisfied if the loan underlying an upsized tranche was originated or purchased by an Eligible Lender after December 31, 2019? ... 23
- D.11. What does it mean for an MSELF Upsized Tranche to be "senior to or pari passu with, in terms of priority and security, the Eligible Borrower's other loans or debt instruments, other than mortgage debt"? ... 23
- D.12. Is an Eligible Lender required to hold all of its position in the credit facility underlying an MSELF Upsized Tranche for the life of the loan? ... 25

E. Borrower Eligibility ... 26
- E.1. Which entities are eligible to borrow under the Program? ... 26
- E.2. How is "Business" defined? ... 27
- E.3. How should a Business count employees for purposes of determining eligibility under the Program? ... 29
- E.4. How should a Business calculate 2019 revenues for purposes of determining eligibility under the Program? ... 29
- E.5. Which entities are a Business's affiliates for purposes of the employee and revenue eligibility criteria? ... 29
- E.6. Are non-profit organizations eligible to borrow under the Program? ... 30
- E.7. Will an alternative underwriting metric be developed for asset-based borrowers? ... 30
- E.8. What does "significant operations in the United States" mean? ... 30
- E.9. Can a U.S. company that is a subsidiary of a foreign company qualify as an Eligible Borrower? ... 30
- E.10. Can an otherwise eligible business borrow if its affiliate has already borrowed under a Main Street Facility or the PMCCF? ... 31
- E.11. Is a private equity fund eligible to borrow under the Program? ... 32
- E.12. Is a portfolio company of a private equity fund eligible to borrow under the Program? ... 32
- E.13. Are Eligible Lenders required to adopt any special compliance procedures to verify that a Borrower is not an "Ineligible Business" under 13 CFR 120.110(o)? ... 33
- E.14. Is a business operating as a sole proprietorship eligible for a Main Street loan? ... 33
- E.15. [Reserved.] ... 34
- E.16. [Reserved.] ... 34
- E.17. [Reserved.] ... 34
- E.18. [Reserved.] ... 34
- E.19. [Reserved.] ... 34

F. Application Process ... 34
- F.1. How can I apply for a Program loan? ... 34
- F.2. Is a Business eligible to borrow if it receives a PPP loan or Economic Injury Disaster loan (EIDL)? ... 34
- F.3. Do Eligible Borrowers qualify automatically for a loan under the Program? ... 34
- F.4. Can an Eligible Borrower apply for a Main Street loan through multiple Eligible Lenders? ... 35

G. Terms and Conditions ... 35
- G.1. How will adjusted 2019 EBITDA be calculated? ... 35
- G.2. How will "existing outstanding and undrawn available debt" be calculated? ... 35
- G.3. Why are Program loans based on LIBOR rather than SOFR? ... 36
- G.4. When do I need to start paying interest and principal on my loan? ... 36
- G.5. How will principal be amortized after the second year? ... 36
- G.6. Is collateral required for Main Street loans? ... 36
- G.7. Are there fees associated with Main Street loans? ... 37
- G.8. What constitutes "commercially reasonable efforts" to maintain payroll and retain employees? ... 38
- G.9. Can an Eligible Borrower receive more than one Main Street loan? ... 38
- G.10. Can an Eligible Borrower receive a loan if its maximum loan size under a facility's term sheet test is below the minimum loan size for the same facility? ... 39
- G.11. How can an Eligible Borrower determine if its existing loans had an internal risk rating equivalent to a "pass" in the FFIEC's supervisory rating system on December 31, 2019? ... 39
- G.12. Can a Lender charge a Borrower additional fees above the Main Street origination fee and/or an interest rate above LIBOR + 300 basis points? ... 39
- G.13. What methodology should be used to adjust EBITDA if an Eligible Lender has used a range of methods in the past with respect to a single Eligible Borrower or similarly situated borrowers? ... 40
- G.14. For purposes of adjusting EBITDA, how does an Eligible Lender identify "similarly situated borrowers"? ... 40
- G.15. Why is the Federal Reserve allowing adjustments to EBITDA for purposes of Main Street when it has noted supervisory concerns with these adjustments in the past? Is there a limit to how much EBITDA can be adjusted? ... 40
- G.16. Do PPP loans count as "outstanding debt" for purposes of Main Street? ... 41
- G.17. How will Eligible Borrower prepayments of a Main Street loan be applied against the principal amount due and future amortization payments? ... 42
- G.18. Can permissible fees charged at the time of origination be included in the principal amount of a Main Street loan? ... 42
- G.19. Are Eligible Lenders allowed to include a LIBOR floor in the interest rate on a Main Street Loan? ... 43
- G.20. Can an otherwise Eligible Borrower receive a Main Street loan if it was not in operation during 2019? ... 43
- G.21. Are there any prohibitions on the use of proceeds of a Main Street loan? ... 43
- G.22. Is an Eligible Lender restricted from setting monthly or quarterly interest payments after the first year, or will interest be required to be payable annually along with amortization payments of principal? ... 44
- G.23. Can an Eligible Lender require an Eligible Borrower to provide collateral or guarantees solely with respect to the Eligible Lender's 5% retained portion of a Main Street loan? ... 44
- G.24. Are personal guarantees required and/or permitted? ... 44
- G.25. If an Eligible Borrower's outstanding debt is maturing within 90 days, can a Main Street loan be used to refinance such debt at the time of origination? ... 44
- G.26. Can an Eligible Lender or Eligible Borrower hedge interest rate and credit risk in connection with Main Street loans? ... 45
- G.27. Can Eligible Lenders and Eligible Borrowers agree to include cash collateral deposits, compensating balances, cash reserve accounts, or cash escrow accounts at origination or during the life of a Main Street loan as part of the loan terms? ... 45

H. Certifications and Covenants ... 46
- H.1. Are the required certifications and covenants under the three Main Street facilities the same? ... 46
- H.2. What compensation, stock repurchase and capital distributions restrictions apply? ... 46
- H.3. What restrictions are placed on the Eligible Borrower's ability to repay existing debt? ... 47
- H.4. Is an Eligible Lender permitted to accept partial repayment of an Eligible Borrower's existing line of credit with the Eligible Lender? ... 48
- H.5. What restrictions are placed on an Eligible Lender's ability to cancel or reduce any existing committed lines of credit outstanding? ... 48
- H.6. What is the Eligible Lender's role in verifying certifications and covenants? ... 48
- H.7. What debt and interest payments are considered "mandatory and due"? ... 48
- H.8. Can an Eligible Borrower receive an MSNLF Loan or an MSELF Upsized Tranche if its existing debt arrangements require prepayment of an amount that is not de minimis upon the incurrence of new debt? ... 49
- H.9. How must a Main Street borrower demonstrate that it is "unable to secure adequate credit accommodations from other banking institutions"? ... 49
- H.10. How should Eligible Borrowers prepare financial records and determine inputs to their 2019 adjusted EBITDA calculation in connection with section 4.A of the Borrower Certifications and Covenants? ... 50
- H.11. In certifying that an Eligible Borrower or Eligible Lender is not a "covered entity" under the conflicts of interest certification, what level of reasonable diligence is required with regard to equity interests (including non-voting preferred stock) held by financial intermediaries? ... 51
- H.12. How should Eligible Borrowers calculate "total compensation" for purposes of complying with limits on compensation under the direct loan restrictions? ... 52
- H.13. What if an Eligible Borrower chooses, at the time of disbursement of the Main Street loan, to calculate total compensation using the federal tax rules for all officers or employees that were not Significant Deferred Compensation Recipients (as defined in question H.12), and the Eligible Borrower later increases the amount of deferred compensation so that one or more of these individuals become Significant Deferred Compensation Recipients? ... 54
- H.14. What if an Eligible Borrower that has chosen to calculate total compensation using the federal tax rules (as permitted by question H.12) later becomes a public company? ... 54
- H.15. Is a tribal business prohibited from paying dividends or making other capital distributions to a tribal government owner under the covenant in section 2.D of the Borrower Certifications and Covenants? ... 55
- H.16. How should an Eligible Borrower that is organized as a partnership, limited liability company, S corporation, or similar tax pass-through entity comply with restrictions on compensation and capital distributions under the direct loan restrictions with respect to payments made to owners of the Eligible Borrower? ... 55
- H.17. How do the capital distribution and repurchase restrictions apply to ownership interests held by Employee Stock Ownership Plans (ESOPs)? ... 57
- H.18. Do certifications and covenants apply to successors? ... 58
- H.19. How do the compensation, capital distribution, and stock repurchase restrictions apply to an organization in which more than one entity borrows from the Main Street Lending Program? ... 58
- H.20. Do restrictions on dividend payments and capital distributions apply to loans made by an Eligible Borrower to an individual that is an owner of such Eligible Borrower? ... 58
- H.21. What restrictions apply to an Eligible Borrower's repayment of a loan made to the Eligible Borrower by an owner of the Eligible Borrower? ... 59
- H.22. Do restrictions on compensation apply to loans made by an Eligible Borrower to an employee or officer of such Eligible Borrower? ... 60
- H.23. How should an Eligible Borrower that is an S Corporation comply with the requirement to conduct an annual reconciliation with respect to distributions paid to cover its owners' tax obligations? ... 60
- H.24. How should I read the term "Borrower" in the Borrower Certifications and Covenants for multi-borrower loans? ... 61
- H.25. How should I read the term "Borrower" in the Lender Transaction Specific Certifications and Covenants for multi-borrower loans? ... 61

I. Lender Information ... 63
- I.1. Which financial institutions are eligible to make loans under the Program? ... 63
- I.2. How should an Eligible Lender evaluate an Eligible Borrower's creditworthiness? ... 63
- I.3. Can multiple affiliated Eligible Lenders participate in Main Street? ... 64
- I.4. Will standard loan documents be provided for Main Street loans, or should Eligible Lenders use their own loan documentation? ... 64
- I.5. How should an Eligible Lender account for the transfer of an undivided participation interest in the loan to the Main Street SPV? ... 64
- I.6. Do the participation interests purchased by the Main Street SPV under the Program constitute "true participations"? ... 65
- I.7. Does the sale of participation interests to the Main Street SPV meet the criteria for a true sale under the Bankruptcy Code? ... 67
- I.8. Does the Main Street SPV have the right to put back the participation interests to the Eligible Lender? ... 68
- I.9. Do the participation interests purchased by the Main Street SPV potentially qualify for a "safe harbor" in relation to FDIC resolution proceedings? ... 68
- I.10. Do the participation interests purchased by the Main Street SPV potentially qualify for a "safe harbor" in relation to NCUA resolution proceedings? ... 69
- I.11. Does the Servicing Agreement contemplated between the Eligible Lender and the Main Street SPV impact whether the sale of participation interests can be considered a "true sale"? ... 69
- I.12. Will payment-in-kind ("PIK") interest that has accrued (but has not yet been capitalized to principal) during the period of time starting on the date when the loan agreement is funded to the date when the loan participation purchase is funded be allocated to the Seller (i.e., the Eligible Lender)? ... 69
- I.13. Can an Eligible Lender that is a depository institution pledge its 5% of a Main Street loan to a Federal Reserve Bank as collateral? ... 70
- I.14. [Reserved.] ... 70
- I.15. Must Main Street loan documents be governed by U.S. law? ... 70

J. Loan Participation ... 70
- J.1. What loan documentation is required to sell a participation to the Main Street SPV under the Program? ... 70
- J.2. What loan-level information will the SPV collect for credit monitoring purposes? ... 70
- J.3. Is there a limit to the volume of participations the Main Street SPV can purchase from a single Eligible Lender? ... 71
- J.4. Under the Loan Participation Agreement, when can the Main Street SPV sell its loan participation or elevate its loan participation into an assignment? ... 71
- J.5. What role will the Main Street SPV play in the event an Eligible Borrower enters distress? ... 72
- J.6. How will the Main Street SPV approach decision-making with respect to its voting rights under the Loan Participation Agreement or Co-Lender Agreement? ... 72
- J.7. Will the Main Street SPV assert special administrative priority under Section 507(a)(2) of the Bankruptcy Code for its claims against an Eligible Borrower in bankruptcy proceedings? ... 73
- J.8 How can an Eligible Lender obtain instructions from the Main Street SPV in relation to a "Core Rights Act" under the Participation Agreement? ... 74

K. Regulatory Treatment ... 74
- K.1. What is the regulatory capital treatment for the interest in a Main Street loan retained by an Eligible Lender? ... 74
- K.2. How will Program loans be treated for supervised firms subject to stress testing? ... 75
- K.3. Are Main Street loans for existing customers considered new accounts for FinCEN Rule CDD purposes? Are lenders required to collect, certify, or verify beneficial ownership information in accordance with the rule requirements for existing customers? ... 75
- K.4. How will federal supervisors treat loans extended through the Main Street program? ... 76
- K.5. For an Eligible Lender that is a national bank or savings association, do lending limits apply to the entire size of a Main Street loan, or only the percentage of a loan that is retained by the Eligible Lender? ... 76
- K.6. For Eligible Lenders that are federally insured credit unions, does the member business loan limit apply to the entire size of a Main Street loan, or only the percentage of a loan that is retained by the Eligible Lender? ... 77
- K.7. For Eligible Lenders that are federally insured credit unions, does the limit on commercial loans to one member apply to the entire size of a Main Street loan, or only the percentage of a loan that is retained by the Eligible Lender? ... 78
- K.8. Do the terms of the for-profit Main Street facilities raise concerns under the Indian Gaming Regulatory Act (IGRA)? ... 78

L. Operational Details ... 79
- L.1. How will the Federal Reserve administer the Program? ... 79
- L.2. What information will the Federal Reserve disclose regarding the Main Street facilities? ... 79
- L.3. How will the remaining capacity of the Program be communicated? ... 79
- L.4. Are Eligible Lenders required to commit and pre-fund loans under the Program before the SPV has committed to purchase its participation in a Program Loan? ... 80
- L.5. Will the Main Street SPV purchase participations in MSNLF Loans, MSPLF Loans, or MSELF Upsized Tranches that conform to the April 30, 2020 version of the Program term sheets? ... 81
- L.6. If a loan was originated or upsized in conformance with the April 30, 2020 term sheets, could it be refinanced or otherwise amended under the June 8, 2020 terms? ... 81
- L.7. What conditions will the Main Street SPV place on purchasing participations in Program loans? ... 82
- L.8. What financial information is an Eligible Borrower required to submit to an Eligible Lender at the time of origination of a Main Street loan? What Eligible Borrower financial information is an Eligible Lender required to submit to the Main Street Portal with other loan participation documentation? ... 82
- L.9. What information is an Eligible Lender required to submit to the Main Street Portal in connection with the submission of the documentation required to sell a loan participation to the Main Street SPV? ... 84
- L.10. What type of Lender Portal security is in place, such that lenders and borrowers can be assured that their data will be maintained securely? ... 86
- L.11. If an Eligible Lender uses the Condition of Funding Model in Question L.4, how should loan documents be prepared to reflect the required maturity period, interest rate, deferral and accrual, principal amortization, and loan number? ... 86
- L.12. Can a single Main Street loan be made to multiple co-borrowers? ... 87
- L.13. By what date should Eligible Lenders submit loans to the Main Street SPV for purchase of a participation interest? ... 88

M. Other Information ... 88
- M.1. Where should questions regarding the Program be directed? ... 88
- M.2. How can I receive updates regarding changes to the Program? ... 88
- M.3. Will the Federal Reserve provide further guidance on how to apply the terms of the Program to individual borrowers? ... 89
- M.4. Are recordings of Main Street webinar sessions available? ... 89
- M.5. Where can I find instructions for how to complete the Main Street legal forms and agreements? ... 89

Appendix A: Loan Document Checklist ... 91
Appendix B: Required Covenants in Loan Documentation ... 95
- I. Priority and Security Covenant ... 95
- II. Borrower Certifications and Covenants Material Breach Mandatory Prepayment Provision ... 97
- III. Cross-Acceleration Provision ... 98
- IV. Financial Reporting Covenant ... 99
Appendix C: Required Financial Reporting ... 101

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## A. Purpose and Design

### A.1. Why is the Federal Reserve establishing the Program?

The spread of COVID-19 has harmed communities and substantially disrupted economic activity in many sectors of the economy. In general, the availability of credit has contracted for small and medium-sized businesses while, at the same time, the disruptions to economic activity have heightened the need for such companies to obtain financing. Small and medium-sized businesses are integral to the U.S. economy and create jobs for a large share of the U.S. workforce.

Main Street is designed to provide support to small and medium-sized businesses and their employees across the United States during the current period of financial strain by supporting the provision of credit to such businesses. The availability of additional credit is intended to help companies that were in sound financial condition prior to the onset of the COVID-19 pandemic maintain their operations and payroll until conditions normalize.

### A.2. How is the Department of the Treasury supporting the Program?

The Department of the Treasury (Treasury Department) will make a $75 billion equity investment in a Special Purpose Vehicle (Main Street SPV) in connection with the Program. The funds invested by the Treasury Department were appropriated to the Exchange Stabilization Fund under section 4027 of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act).

### A.3. Are loans that are originated or upsized in connection with the Program forgivable?

No. Main Street loans are full-recourse loans and are not forgivable. Under section 4003(d)(3) of the CARES Act, the principal amount of a Main Street loan cannot be reduced through loan forgiveness.

### A.4. What are the differences between the MSNLF, the MSPLF, and the MSELF?

Main Street includes three facilities that lend to for profit businesses, each of which was authorized by the Board of Governors of the Federal Reserve System (Board) under section 13(3) of the Federal Reserve Act. All three facilities use the same Eligible Lender and Eligible Borrower criteria, and have many of the same features, including the same maturity, interest rate, deferral of principal for two years, deferral of interest for one year, and ability of the borrower to prepay without penalty.

Other features of the loans extended in connection with each facility differ. The loan types also differ in how they interact with the Eligible Borrower's existing outstanding debt, including with respect to the level of pre-crisis indebtedness an Eligible Borrower may have incurred.

- **MSNLF:** Eligible Lenders extend new five-year term loans to Eligible Borrowers ranging in size from $100,000 to $35 million. The maximum size of a loan made in connection with the MSNLF cannot, when added to the Eligible Borrower's existing outstanding and undrawn available debt, exceed four times the Eligible Borrower's adjusted 2019 earnings before interest, taxes, depreciation, and amortization (EBITDA). The loans must not be, at the time of origination or at any time during the term of the Eligible Loan, contractually subordinated in terms of priority to any of the Eligible Borrower's other loans or debt instruments. The unique features of loans originated in connection with the MSNLF (MSNLF Loans) are provided in the MSNLF term sheet.
- **MSPLF:** Eligible Lenders extend new five-year term loans to Eligible Borrowers ranging in size from $100,000 to $50 million. The maximum size of a loan made in connection with the MSPLF cannot, when added to the Eligible Borrower's existing outstanding and undrawn available debt, exceed six times the Eligible Borrower's adjusted 2019 EBITDA. At the time of origination and at all times thereafter, the Eligible Loan must be senior to or pari passu with, in terms of priority and security, the Eligible Borrower's other loans or debt instruments, other than mortgage debt. Eligible Borrowers may, at the time of origination of the loan, refinance existing debt owed by the Eligible Borrower to a lender that is not the Eligible Lender. The unique features of loans originated in connection with the MSPLF (MSPLF Loans) are provided in the MSPLF term sheet.
- **MSELF:** Eligible Lenders increase (or "upsize") an Eligible Borrower's existing term loan or revolving credit facility. The upsized tranche is a five-year term loan ranging in size from $10 million to $300 million. The maximum size of a loan made in connection with the MSELF cannot, when added to the Eligible Borrower's existing outstanding and undrawn available debt, exceed six times the Eligible Borrower's adjusted 2019 EBITDA. At the time of upsizing and at all times thereafter, the upsized tranche must be senior to or pari passu with, in terms of priority and security, the Eligible Borrower's other loans or debt instruments, other than mortgage debt. The features associated with tranches of loans that are upsized in connection with the MSELF (MSELF Upsized Tranches) are outlined in the MSELF term sheet.

### A.5. How long will the Program be in effect?

Pursuant to section 1005 of the Consolidated Appropriations Act, 2021, the Board and the Secretary have extended the Program until January 8, 2021, provided that after December 31, 2020, the Main Street SPV will purchase only participations in Eligible Loans initially submitted to the Main Street lender portal on or before December 14, 2020. See question L.13 for further information on the Program's termination timeline.

### A.6. Is there a limit to the size of the Program?

The Main Street SPV will purchase up to $600 billion of participations in eligible loans. The Federal Reserve and the Treasury Department have assessed this amount to be appropriate in light of the current financial strains facing Eligible Borrowers. The Federal Reserve and the Treasury Department will continue to assess the situation and needs of Eligible Borrowers and may adjust the Program's size in the future.

### A.7. What are the differences between the Program and the Paycheck Protection Program and Primary Market Corporate Credit Facility?

Similar to the Paycheck Protection Program (PPP) and the Primary Market Corporate Credit Facility (PMCCF), Main Street was created to assist companies that have been adversely affected by the COVID-19 pandemic. Each of these programs, however, was developed to provide liquidity to companies of different sizes:

- **PPP:** The PPP was established by the CARES Act and implemented by the Small Business Administration (SBA) to support the payroll and operations of small businesses through the issuance of government-guaranteed loans that include a forgiveness feature for borrowers that satisfy the requirements of the PPP.
- **Main Street:** The Federal Reserve designed Main Street to support small and medium-sized businesses that were unable to access the PPP or that require additional financial support after receiving a PPP loan. Main Street loans are not forgivable.
- **PMCCF:** The Federal Reserve established the PMCCF to support large companies through the purchase of eligible corporate bonds from, and lending through syndicated loans to, large companies. PMCCF loans are not forgivable.

### A.8. What provisions of the CARES Act apply to the Program?

Under section 4003(b)(4) of the CARES Act, the Secretary of the Treasury (Secretary) is authorized to make loans and loan guarantees to, and other investments in, programs or facilities established by the Board for the purpose of providing liquidity to the financial system that supports lending to eligible businesses, states, or municipalities. The Secretary has committed $75 billion of the funds appropriated under Title IV of the CARES Act in the Main Street SPV in support of the Program. The following restrictions of the CARES Act have been incorporated into the design of the Program:

- **Eligible Business Definition:** Section 4002(4) of the CARES Act prevents a business from participating in the Program if it has "otherwise received adequate economic relief in the form of loans or loan guarantees provided under [the Coronavirus Economic Stabilization Act of 2020 (Subtitle A of Title IV of the CARES Act)]." Consistent with this restriction, businesses that are receiving "specific support" pursuant to section 4003(b)(1)-(3) are not eligible for the Program.
- **Direct Loans:** Eligible Borrowers must commit to comply with the restrictions that apply to direct loan programs under section 4003(c)(3)(A)(ii) of the CARES Act, except that an S corporation or other tax pass-through entity that is an Eligible Borrower may make distributions to the extent reasonably required to cover its owners' tax obligations in respect of the entity's earnings.
- **U.S. Business Requirement:** Under section 4003(c)(3)(C) of the CARES Act, Eligible Borrowers must be "businesses that are created or organized in the United States or under the laws of the United States and that have significant operations in and a majority of its employees based in the United States."
- **Loan Forgiveness Prohibition:** Under section 4003(d)(3), the principal amount of the portion of any MSNLF Loan, MSPLF Loan, or MSELF Upsized Tranche that is participated to the Main Street SPV cannot be reduced through loan forgiveness. See question A.10 for more information about this requirement.
- **Conflicts of Interest:** Under section 4019 of the CARES Act, Eligible Lenders and Eligible Borrowers will be required to certify that no "Covered Individual" owns, controls, or holds 20% or more (by vote or value) of any class of equity ownership interest in the business. "Covered Individuals" include the President, the Vice President, the head of any Executive Department, any Member of Congress, and certain immediate family members of the foregoing.

### A.9. What are the conflicts of interest provisions of the CARES Act?

Section 4019 of the CARES Act prohibits entities in which certain government officials (list here) and some of their immediate family members have a "controlling interest" from participating in certain government programs, including Main Street. Each participating entity, both Eligible Lenders and Eligible Borrowers, will be required to certify that the entity is not a "covered entity" as defined in section 4019 of the CARES Act. Detailed instructions are provided in the Lender Registration Certifications and Covenants and the MSNLF, MSPLF, and MSELF Borrower Certifications and Covenants.

### A.10. Can the principal amount of loans extended under Main Street be reduced?

Main Street is not a grant program and is subject to the prohibition on loan forgiveness in section 4003(d)(3) of the CARES Act. In the event of restructurings or workouts, the Main Street SPV may agree to reductions in interest (including capitalized interest), extended amortization schedules and maturities, and higher priority "priming" loans.

## B. MSNLF Loans

### B.1. How does the MSNLF work?

Eligible Lenders may extend a new MSNLF Loan to an Eligible Borrower and sell a 95% participation in that MSNLF Loan to the Main Street SPV at par value. All such sales will be structured as "true sales" and must be completed expeditiously after the origination of the MSNLF Loan. The Eligible Lender must retain 5% of the MSNLF Loan until (i) it matures or (ii) neither the Main Street SPV nor a Governmental Assignee holds an interest in MSNLF Loan in any capacity, whichever comes first. The Main Street SPV and the Eligible Lender would share in any losses on the MSNLF Loan on a pari passu basis.

The Eligible Borrower must have been in sound financial condition prior to the onset of the COVID-19 pandemic. In order for an Eligible Borrower to receive an MSNLF Loan, any existing loan it had outstanding with the Eligible Lender as of December 31, 2019, must have had an internal risk rating (based on the Eligible Lender's risk rating system) that was equivalent to a "pass" in the Federal Financial Institutions Examination Council's (FFIEC) supervisory rating system as of that date.

### B.2. What are the terms of MSNLF Loans?

The MSNLF term sheet is available on the Board's Main Street page. More information will be made available on that page regarding loan participation terms, credit administration, and loan servicing.

### B.3. What is the effect of the requirement that MSNLF Loans not be "contractually subordinated in terms of priority" to other loans or debt instruments?

An MSNLF Loan, at the time of origination or at any time during its term, may not be contractually subordinated in terms of priority to the Eligible Borrower's other loans or debt instruments. This means that an MSNLF Loan may not be junior in priority in bankruptcy to the Eligible Borrower's other unsecured loans or debt instruments.[^1] This provision does not prevent:

- the issuance of an MSNLF Loan that is a secured loan (including in a second lien or other capacity) to an Eligible Borrower, whether or not the Eligible Borrower has an outstanding secured loan of any lien position or maturity;
- the issuance of an MSNLF Loan that is an unsecured loan to an Eligible Borrower, regardless of the term or secured or unsecured status of the Eligible Borrower's existing indebtedness; or
- the Eligible Borrower from taking on new secured or unsecured debt after receiving an MSNLF Loan, provided the new debt would not have higher contractual priority in bankruptcy than the MSNLF Loan.

[^1]: For the avoidance of doubt, prohibitions on contractual subordination with respect to Main Street loans do not prevent the incurrence of obligations that have mandatory priority under the Bankruptcy Code or other insolvency laws that apply to entities generally.

### B.4. Can an Eligible Lender make an MSNLF Loan to a new customer?

Yes. Eligible Lenders should follow their normal policies and procedures for originating a loan to a new customer, including Know Your Customer procedures. In addition, when sizing the amount of the Eligible Loan, the Eligible Lender must require the Eligible Borrower to use an adjusted EBITDA methodology that is based on a methodology that the Eligible Lender has previously required to be used to adjust EBITDA when extending credit to similarly situated borrowers on or before April 24, 2020.

## C. MSPLF Loans

### C.1. How does the MSPLF work?

Eligible Lenders may extend a new MSPLF Loan to an Eligible Borrower and sell a 95% participation in that MSPLF Loan to the Main Street SPV at par value. All such sales will be structured as "true sales" and must be completed expeditiously after the origination of the MSPLF Loan. The Eligible Lender must retain 5% of the MSPLF Loan until (i) it matures or (ii) neither the Main Street SPV nor a Governmental Assignee holds an interest in the MSPLF Loan in any capacity, whichever comes first. The Main Street SPV and the Eligible Lender would share in any losses on the MSPLF Loan on a pari passu basis.

The Eligible Borrower must have been in sound financial condition prior to the onset of the COVID-19 pandemic. In order for an Eligible Borrower to receive an MSPLF Loan, any existing loan it had outstanding with the Eligible Lender as of December 31, 2019, must have had an internal risk rating (based on the Eligible Lender's risk rating system) that was equivalent to a "pass" in the FFIEC's supervisory rating system as of that date.

### C.2. What are the terms of MSPLF Loans?

The MSPLF term sheet is available on the Board's Main Street page. More information will be made available on that page regarding loan participation terms, credit administration, and loan servicing.

### C.3. Can an Eligible Lender make an MSPLF Loan to a new customer?

Please see the answer to question B.4 above.

### C.4. Can an Eligible Borrower use the proceeds of an MSPLF Loan to refinance its existing loans?

At the time of origination of an MSPLF Loan, an Eligible Borrower may use the proceeds of the MSPLF Loan to prepay existing debt that is outstanding and owed to lenders other than the Eligible Lender that originates the MSPLF Loan and the Eligible Lender's affiliates. In other words, the proceeds of an MSPLF Loan can be used to refinance existing loans owed to other unaffiliated lenders.

After origination and until the MSPLF Loan is repaid in full, the Eligible Borrower must refrain from repaying the principal balance of, or paying any interest on, any debt other than the MSPLF Loan, unless the debt or interest payment is mandatory and due. See questions H.3 and H.7 below for further information on the debt repayment restrictions.

### C.5. What does it mean for an MSPLF Loan to be "senior to or pari passu with, in terms of priority and security, the Eligible Borrower's other loans or debt instruments, other than mortgage debt"?

MSPLF Loans must be senior to or pari passu with, in terms of priority and security, the Eligible Borrower's other Loans or Debt Instruments, other than Mortgage Debt (the MSPLF Priority and Security Requirement). The MSPLF Priority and Security Requirement is designed to prevent MSPLF Loans from being subordinated or otherwise disadvantaged in terms of priority or security in relation to the other Loans or Debt Instruments of the Eligible Borrower, except for Mortgage Debt.

For purposes of the MSPLF Priority and Security Requirement:

- "Loans or Debt Instruments" means debt for borrowed money and all obligations evidenced by bonds, debentures, notes, loan agreements or other similar instruments, and all guarantees of the foregoing.
- "Mortgage Debt" means (i) debt secured only by real property at the time of the MSPLF Loan's origination;[^2] and (ii) limited recourse equipment financings (including equipment capital or finance leasing and purchase money equipment loans) secured only by the acquired equipment.

[^2]: On July 15, 2020, the definition of "mortgage debt" was clarified to reflect that debt secured by real property qualifies as mortgage debt only if it is solely secured by real property. This clarification is intended to be incorporated into the definition of mortgage debt under the MSPLF Borrower Certifications and Covenants and Lender Transaction-Specific Certifications and Covenants. MSPLF Loans extended (i.e., funded or submitted to the Main Street Lender Portal) in good faith on or before July 17, 2020 that do not reflect this clarification are not adversely affected by the clarification.

Time of Origination: To comply with the MSPLF Priority and Security Requirement at the time of origination, Eligible Lenders and Eligible Borrowers must apply the following guidance:

- **Secured Loans:** The MSPLF Loan must be secured if, at the time of origination, the Eligible Borrower has any other secured Loans or Debt Instruments, other than Mortgage Debt.
  - *Pari Passu or Senior in Priority:* The MSPLF Loan must not be contractually subordinated in terms of priority to any of the Eligible Borrower's other Loans or Debt Instruments.
  - *Pari Passu or Senior in Security:*
    - If the MSPLF Loan is secured because the Eligible Borrower has other secured debt that is not Mortgage Debt, then the Collateral Coverage Ratio for the MSPLF Loan at the time of its origination must be either (i) at least 200% or (ii) not less than the aggregate Collateral Coverage Ratio for all of the Borrower's other secured Loans or Debt Instruments (other than Mortgage Debt).
      - "Collateral Coverage Ratio" means (i) the aggregate value of any relevant collateral security, including the pro rata value of any shared collateral, divided by (ii) the outstanding aggregate principal amount of the relevant debt. For examples of Collateral Coverage Ratio calculations, please see this document.
    - If the MSPLF Loan is secured by the same collateral as any of the Eligible Borrower's other Loans or Debt Instruments (other than Mortgage Debt) because the Eligible Borrower has other secured debt that is not Mortgage Debt, the lien upon such collateral securing the MSPLF Loan must be and remain senior to or pari passu with the lien(s) of the other creditor(s) upon such collateral. The MSPLF Loan need not share in all of the collateral that secures the Eligible Borrower's other Loans or Debt Instruments.
    - For the avoidance of doubt, if an Eligible Borrower has no other secured debt (other than Mortgage Debt), the Collateral Coverage Ratio and pari passu requirements do not apply to the collateral that secures the MSPLF Loan.
- **Unsecured Loans:** The MSPLF Loan can be unsecured only if the Eligible Borrower does not have, as of the date of origination, any secured Loans or Debt Instruments (other than Mortgage Debt). Unsecured MSPLF Loans must not be contractually subordinated in terms of priority to any of the Eligible Borrower's other unsecured Loans or Debt Instruments. See question B.3 for more information on contractual subordination.

Life of the Loan: In order to comply with the MSPLF Priority and Security Requirement during the term of the MSPLF Loan after the date of origination, the loan documentation for the MSPLF Loan must:

- ensure that the MSPLF Loan does not become contractually subordinated in terms of priority to any of the Eligible Borrower's other loans or debt instruments; and
- contain a lien covenant or negative pledge that is of the type – and contains exceptions, limitations, carve-outs, baskets, materiality thresholds, and qualifiers – that are consistent with those used by the Eligible Lender in its ordinary course lending to similarly situated borrowers. Appendix B contains a model lien covenant that Eligible Lenders should reference when drafting their loan documentation.

See question G.14 for more information on identifying similarly situated borrowers. See the MSPLF Borrower Certifications and Covenants and MSPLF Lender Transaction Specific Certifications and Covenants for more information about the responsibilities that Borrowers and Lenders have in relation to the MSPLF Priority and Security Requirement.

### C.6. If an Eligible Borrower is using an MSPLF Loan to refinance debt it owes to a different lender, should that debt be counted in its calculation of "existing outstanding and undrawn available debt"?

No. The outstanding debt of the Eligible Borrower that is being refinanced by an MSPLF Loan should not be included in the calculation of the Eligible Borrower's "existing outstanding and undrawn available debt." To the extent that such outstanding debt is only being partially refinanced by the Main Street loan, only the portion that is being refinanced may be excluded from the "existing outstanding and undrawn available debt" calculation. The Eligible Borrower must ensure that all such excluded debt is fully refinanced by the Main Street loan expeditiously.

## D. MSELF Upsized Tranches

### D.1. How does the MSELF work?

Eligible Lenders that have extended an existing term loan or revolving credit facility to an Eligible Borrower may increase (or "upsize") that extension of credit, by adding a new increment (or "tranche"). Eligible Lenders may sell a 95% participation in the MSELF Upsized Tranche to the Main Street SPV at par value. All such sales will be structured as "true sales" and must be completed expeditiously after the upsizing. The Eligible Lender must retain 5% of the MSELF Upsized Tranche until (i) it matures or (ii) neither the Main Street SPV nor a Governmental Assignee holds an interest in MSELF Upsized Tranche in any capacity, whichever comes first. The Eligible Lender must also retain its interest in the underlying loan until (i) that loan matures, (ii) the MSELF Upsized Tranche matures, or (iii) neither the Main Street SPV nor a Governmental Assignee holds an interest in the MSELF Upsized Tranche in any capacity, whichever comes first. The Main Street SPV and the Eligible Lender would share in any losses on the MSELF Upsized Tranche on a pari passu basis. Any collateral that secures the underlying loan must secure the upsized tranche on a pari passu basis.

To be eligible for "upsizing," the existing term loan or revolving credit facility must have been originated on or before April 24, 2020, and must have a remaining maturity of at least 18 months. The Eligible Lender may extend the maturity of an existing loan or revolving credit facility at the time of upsizing in order for the underlying instrument to satisfy the 18-month remaining maturity requirement.

The Eligible Borrower must have been in sound financial condition prior to the onset of the COVID-19 pandemic. The existing loan or revolving credit facility must have had a risk rating, based on the Eligible Lender's internal rating system, equivalent to a "pass" in the FFIEC's supervisory rating system as of December 31, 2019.

### D.2. What are the terms of MSELF Upsized Tranches?

The MSELF term sheet is available on the Board's Main Street page. More information will be made available on that page regarding loan participation terms, credit administration, and loan servicing.

### D.3. Under the MSELF, can an Eligible Lender sell a participation in an upsized tranche of a loan that was originated as part of a multi-lender facility?

If the loan underlying an MSELF Upsized Tranche is part of a multi-lender facility, the Eligible Lender must be one of the lenders that holds an interest in the underlying loan at the date of upsizing. Only the Eligible Lender for the MSELF Upsized Tranche is required to meet the Eligible Lender criteria. Other members of the multi-lender facility are not required to be Eligible Lenders.

More than one lender under an existing multi-lender facility may choose to "upsize" the existing facility to originate an MSELF Upsized Tranche. Such MSELF Upsized Tranches should be separately submitted to the SPV for the sale of a participation interest. However, the Eligible Borrower's aggregate borrowing is constrained by the MSELF maximum loan size tests and, therefore, the Eligible Borrower's aggregate borrowing cannot exceed $300 million or an amount that, when added to the Eligible Borrower's existing outstanding and undrawn available debt, exceeds six times the Eligible Borrower's adjusted 2019 EBITDA.

### D.4. Does the Eligible Lender for the MSELF Upsized Tranche need to have been the lender that originated the underlying loan?

No. The Eligible Lender is not required to have been the lender that originally extended the loan underlying an MSELF Upsized Tranche. If the Eligible Lender purchased the interest in the underlying loan as of December 31, 2019, the Eligible Lender must have assigned an internal risk rating to the underlying loan equivalent to a "pass" in the FFIEC's supervisory rating system as of that date. If the Eligible Lender purchased the interest after December 31, 2019, the Eligible Lender should use the internal risk rating given to that loan at the time of purchase to determine whether the loan is eligible for upsizing under the MSELF.

The position that an Eligible Lender relies upon to upsize a loan in connection with the MSELF may have been purchased from an Eligible Lender or a non-eligible lender.

### D.5. If an existing multi-lender facility loan does not have an "opening" or "accordion" clause, can it still be eligible for upsizing under the MSELF?

Yes. The Eligible Borrower, Eligible Lender(s), and any other required parties must amend the underlying credit agreements as needed to comply with the requirements set out in the MSELF term sheet.

### D.6. What requirements exist for the loan underlying an MSELF Upsized Tranche?

The loan underlying an MSELF Upsized Tranche can be a secured or unsecured term loan or revolving credit facility that:

- was made by an Eligible Lender(s) to an Eligible Borrower;
- is currently held, at least in part, by an Eligible Lender;
- was originated on or before April 24, 2020;
- has a remaining maturity of at least 18 months (taking into account any adjustments made to the maturity of the loan after April 24, 2020, including at the time of upsizing); and
- received an internal risk rating equivalent to a "pass" in the FFIEC's supervisory rating system by the Eligible Lender, as of December 31, 2019, or otherwise satisfies the criteria set out in question D.10.

Any collateral securing the underlying credit facility (at the time of upsizing or on any subsequent date) must secure the MSELF Upsized Tranche on a pari passu basis.[^3]

### D.7. Why is the minimum loan size for an MSELF Upsized Tranche $10 million, rather than $100,000 in the MSNLF and the MSPLF?

The MSELF was designed to meet the needs of borrowers with existing loan arrangements, particularly those with larger and more complex existing loans, where pre-existing loan documentation can be used. As a result, the minimum loan size for an MSELF Upsized Tranche is $10 million.

The Federal Reserve recognizes that some aspects of an MSELF Upsized Tranche, such as the potential for a larger loan size associated with the requirement that outstanding and available undrawn debt not exceed six times adjusted EBITDA, may be attractive to Eligible Borrowers seeking a loan below $10 million. The MSPLF offers similar leverage limitations for Eligible Borrowers and has a minimum loan size of $100,000.

The Federal Reserve will continue to evaluate whether the loan amounts allowed under the Program should be adjusted to enhance the Program's efficacy. Any such adjustments would be communicated well in advance of their effective date to ensure that Eligible Lenders and Eligible Borrowers are not adversely affected.

### D.8. Can the Eligible Lender that sells a participation to the Main Street SPV share its 5% retention of the MSELF Upsized Tranche with other members of a multi-lender facility?

No. The Eligible Lender must retain 5% of the MSELF Upsized Tranche, even when the underlying loan is part of a multi-lender facility. The Eligible Lender must retain 5% of the MSELF Upsized Tranche until (A) the MSELF Upsized Tranche matures or (B) neither the Main Street SPV nor a Governmental Assignee holds an interest in the loan in any capacity, whichever occurs first.

### D.9. What if no EBITDA methodology was used when originating or amending the loan underlying an MSELF Upsized Tranche?

If the Eligible Borrower's EBITDA was not calculated or included in the loan documentation or internal risk analysis when originating the loan or revolving credit facility that would underlie an MSELF Upsized Tranche, the Eligible Lender must require the Eligible Borrower to calculate its[^4] adjusted EBITDA using a methodology that the Eligible Lender has required to be used in other contexts for the Eligible Borrower or, if there is no such calculation, for similarly situated borrowers. See questions G.13 and G.14 for more information.

[^3]: For the avoidance of doubt, Eligible Lenders and Eligible Borrowers may not reduce or restructure the underlying credit facility prior to the origination of the MSELF Upsized Tranche in order to evade the requirement that collateral deemed sufficient by the bank prior to April 24, 2020, be shared on a pari passu basis with the Main Street SPV.

[^4]: (footnote marker as it appears in source) This footnote text continues the cross-reference to the EBITDA methodology guidance in questions G.13 and G.14.

### D.10. How can the "pass" criterion be satisfied if the loan underlying an upsized tranche was originated or purchased by an Eligible Lender after December 31, 2019?

If an existing loan was originated or purchased by an Eligible Lender after December 31, 2019, the Eligible Lender should use the internal risk rating given to that loan at origination or purchase (as applicable) to determine whether the loan satisfies the "pass" criterion for upsizing under the MSELF.

### D.11. What does it mean for an MSELF Upsized Tranche to be "senior to or pari passu with, in terms of priority and security, the Eligible Borrower's other loans or debt instruments, other than mortgage debt"?

MSELF Upsized Tranches must be senior to or pari passu with, in terms of priority and security, the Eligible Borrower's other Loans or Debt Instruments, other than Mortgage Debt (the MSELF Priority and Security Requirement). The MSELF Priority and Security Requirement is designed to prevent MSELF Upsized Tranches from being subordinated or otherwise disadvantaged in terms of priority or security in relation to the other Loans or Debt Instruments of the Eligible Borrower, except for Mortgage Debt.

For purposes of the MSELF Priority and Security Requirement:

- "Loans or Debt Instruments" means debt for borrowed money and all obligations evidenced by bonds, debentures, notes, loan agreements or other similar instruments, and all guarantees of the foregoing.
- "Mortgage Debt" means (i) debt secured only by real property at the time of the MSELF Upsized Tranche's origination;[^5] and (ii) limited recourse equipment financings (including equipment capital or finance leasing and purchase money equipment loans) secured only by the acquired equipment.

[^5]: On July 15, 2020, the definition of "mortgage debt" was clarified to reflect that debt secured by real property qualifies as mortgage debt only if it is solely secured by real property. This clarification is intended to be incorporated into the definition of mortgage debt under the MSELF Borrower Certifications and Covenants and Lender Transaction-Specific Certifications and Covenants. MSELF Upsized Tranches extended (i.e., funded or submitted to the Main Street Lender Portal) in good faith on or before July 17, 2020 that do not reflect this clarification are not adversely affected by the clarification.

Time of Origination: To comply with the MSELF Priority and Security Requirement at the time of origination, Eligible Lenders and Eligible Borrowers must apply the following guidance:

- **Secured Loans:** The MSELF Upsized Tranche must be secured if, at the time of origination, the Eligible Borrower has any other secured Loans or Debt Instruments, other than Mortgage Debt. The MSELF Upsized Tranche must be secured by the collateral (including, if applicable, any Mortgage Debt) securing any other tranche of the underlying credit facility on a pari passu basis. Eligible Lenders and Eligible Borrowers may add new collateral to secure the loan (including the MSELF Upsized Tranche on a pari passu basis) at the time of upsizing. If the underlying credit facility includes both term loan tranche(s) and revolver tranche(s), the MSELF Upsized Tranche needs to share collateral on a pari passu basis with the term loan tranche(s) only.[^6] Secured MSELF Upsized Tranches must not be contractually subordinated in terms of priority to any of the Eligible Borrower's other Loans or Debt Instruments.
- **Unsecured Loans:** The MSELF Upsized Tranche can be unsecured only if the Eligible Borrower does not have, as of the date of origination, any secured Loans or Debt Instruments (other than Mortgage Debt that does not secure any other tranche of the underlying credit facility). Unsecured MSELF Upsized Tranches must not be contractually subordinated in terms of priority to the Eligible Borrower's other unsecured Loans or Debt Instruments. See question B.3 for more information on contractual subordination.

Life of the Loan: In order to comply with the MSELF Priority and Security Requirement during the term of the MSELF Upsized Tranche after the date of origination, the loan documentation for the MSELF Upsized Tranche must:

- ensure that the MSELF Upsized Tranche does not become contractually subordinated in terms of priority to any of the Eligible Borrower's other Loans or Debt Instruments;
- ensure that the MSELF Upsized Tranche remains secured on a pari passu basis by the collateral securing the underlying credit facility, as described in the "time of origination" section above; and
- contain a lien covenant or negative pledge that is of the type – and contains exceptions, limitations, carve-outs, baskets, materiality thresholds, and qualifiers – that are consistent with those used by the Eligible Lender in its ordinary course lending to similarly situated borrowers.
  - Appendix B contains a model lien covenant that Eligible Lenders should reference when drafting MSELF loan documentation.
  - With respect to an underlying credit facility that has more than one lender, any lien covenant that was negotiated in good faith prior to April 24, 2020, as part of any underlying MSELF Loan, is sufficient to satisfy this requirement.

[^6]: For the avoidance of doubt, Eligible Lenders and Eligible Borrowers may not create a new term loan tranche in what was solely a revolving credit facility prior to April 24, 2020, in order to evade the requirement that collateral deemed sufficient by the bank prior to April 24, 2020, be shared on a pari passu basis with the Main Street SPV.

See question G.14 for more information on identifying similarly situated borrowers. See the MSELF Borrower Certifications and Covenants and MSELF Lender Transaction Specific Certifications and Covenants for more information about the responsibilities that Borrowers and Lenders have in relation to the MSELF Priority and Security Requirement.

### D.12. Is an Eligible Lender required to hold all of its position in the credit facility underlying an MSELF Upsized Tranche for the life of the loan?

After originating an MSELF Upsized Tranche, the Eligible Lender must retain its interest in the credit facility underlying the MSELF Upsized Tranche until (i) the underlying credit facility matures, (ii) the MSELF Upsized Tranche matures, or (iii) neither the Main Street SPV nor a Governmental Assignee holds an interest in the MSELF Upsized Tranche in any capacity, whichever comes first.[^7] This requirement is intended to apply to position(s) that an Eligible Lender holds in the underlying credit facility for investment purposes, and is not intended to extend to the purchase or sale of short-term positions by an Eligible Lender's trading desk with unaffiliated parties for market-making purposes. In order to be treated as a market-making position under this exemption, the following conditions must be met:

(i) the position cannot be the position the Eligible Lender relied upon in order to upsize the loan (i.e., it cannot be an Eligible Lender's only position in the underlying credit facility);

(ii) the position must be purchased or sold by a trading desk in a transaction with an unaffiliated party, and must be segregated from the position the lender relied upon to upsize the loan; and

(iii) the position must be held in an available-for-sale capacity in anticipation of reasonably expected near term demand.

If an Eligible Lender comes into possession of additional positions in the underlying credit facility after the upsizing of such facility in connection with the MSELF, it is not required to retain such new positions.

[^7]: For the avoidance of doubt, the Eligible Lender may sell down part of its interest in the underlying credit facility before originating the MSELF Upsized Tranche.

## E. Borrower Eligibility

### E.1. Which entities are eligible to borrow under the Program?

To be eligible to borrow under the Program, a Business must satisfy certain eligibility criteria, as set out in the MSNLF, MSPLF, and MSELF term sheets and described further below. The Eligible Borrower criteria are the same across all three facilities that facilitate lending to for profit businesses.

(1) **The Business must have been established prior to March 13, 2020.** The Business must have been formed prior to March 13, 2020, under the laws of the United States, one of the several states, the District of Columbia, any of the territories and possessions of the United States, or an Indian Tribal government.

(2) **The Business must not be an Ineligible Business.** Ineligible Businesses include Businesses listed in 13 CFR 120.110(b)-(j), (m)-(s), as modified and clarified by SBA regulations for purposes of the PPP on or before April 24, 2020. Such modifications and clarifications include the SBA's recent interim final rules available at 85 Fed. Reg. 20811, 85 Fed. Reg. 21747, and 85 Fed. Reg. 23450 (released by the SBA on April 24, 2020). In addition, as of July 15, 2020, the Federal Reserve has incorporated the SBA's Interim Final Rules published in the Federal Register on June 18, 2020 (85 Fed. Reg. 36717) and June 26, 2020 (85 Fed. Reg. 38301), which amended the SBA's earlier Interim Final Rule published in the Federal Register on April 15, 2020 (85 Fed. Reg. 20811). The Federal Reserve may further modify the application of these restrictions to Main Street.

(3) **The Business must meet at least one of the following two conditions:** (a) the Business has 15,000 employees or fewer, or (b) the Business has 2019 annual revenues of $5 billion or less. Businesses must meet at least one of these conditions, but are not required to meet both. To determine how many employees a Business has or a Business's 2019 revenues, the employees and revenues of the Business must be aggregated with the employees and revenues of its affiliated entities.

(4) **The Business must be a U.S. Business.** Under section 4003(c)(3)(C) of the CARES Act, Eligible Borrowers must be Businesses that were created or organized in the United States or under the laws of the United States with significant operations in and a majority of their employees based in the United States.

(5) **The Business may only participate in one of the Main Street facilities (MSNLF, MSPLF, MSELF, NONLF, or NOELF) and must not also participate in the PMCCF.** An Eligible Borrower may only participate in one of the Main Street facilities: the MSNLF, the MSPLF, the MSELF, the NONLF, or the NOELF. In addition, a Business is not an Eligible Borrower if it participates in the PMCCF.

(6) **The Business must not have received specific support pursuant to the Coronavirus Economic Stabilization Act of 2020 (Subtitle A of Title IV of the CARES Act).** A Business is not eligible if it has received support pursuant to section 4003(b)(1)-(3) of the CARES Act.

(7) **The Business must be able to make all of the certifications and covenants required under the Program.** See the MSNLF, MSPLF, and MSELF Borrower Certifications and Covenants for more information.

Borrowers that satisfy all criteria above may apply to an Eligible Lender for a Main Street loan. In the case of multi-borrower loans, each borrower must meet borrower eligibility criteria. See question H.24 for more information. The Eligible Lender is expected to conduct an assessment of each potential borrower's pre-pandemic financial condition and post-pandemic prospects to determine whether the loan is approved.

For the avoidance of doubt, a Business that has received PPP loans, or that has affiliates that have received PPP loans, is permitted to borrow under Main Street, provided that the Business is an Eligible Borrower. Borrowers that are not eligible for a Main Street loan should consult the Treasury Department and SBA to determine if they are eligible for other relief programs.

### E.2. How is "Business" defined?

Businesses must be legally formed entities that are organized for profit as a partnership; a limited liability company; a corporation; an association; a trust; a cooperative; a joint venture with no more than 49% participation by foreign business entities; a tribal business concern; or a tribal economic enterprise that is separate from the related tribal government, even if not a separate legal entity.

To be eligible for the Program, a tribal business concern must be either (i) wholly owned by one or more Indian tribal governments, or by a corporation that is wholly owned by one or more Indian tribal governments, or (ii) owned in part by one or more Indian tribal governments, or by a corporation that is wholly owned by one or more Indian tribal governments, if all other owners are either U.S. citizens or Businesses. A tribal business concern must be a separate and distinct legal entity organized or chartered by the tribe, Federal, or state authorities. An Eligible Lender must determine, based on its own due diligence and advice from experienced in-house or outside counsel, that the tribal business either does not have or has effectively waived sovereign immunity such that U.S. federal courts, in addition to any state court as may be agreed, may be among courts of competent jurisdiction for matters resulting from the Main Street loan transaction. Such waiver must extend to the Borrower Certifications and Covenants, Assignment-in-Blank, and Co-Lender Agreement, as each is applicable.

As of July 31, 2020, the Federal Reserve used its discretion to clarify that tribal economic enterprises that do not have a separate legal personality from the related tribal government are "Businesses" and are not "Ineligible Businesses" for purposes of the Program, provided that the following criteria are met:

- The Eligible Lender must determine that the finances of the tribal economic enterprise are distinguishable from those of the related tribal government, which may be the "borrower" named under the loan documents. To make such a determination, Eligible Lenders should use their customary underwriting processes, which may require separate financial statements, a board and/or management group distinct from the tribal government, or other controls deemed sufficient by the Eligible Lender to establish separateness. Eligible Lenders may also require certifications or other representations regarding the separateness of the tribal economic enterprise and related tribal government.
- The Business and Eligible Lender must use the financial records of the tribal economic enterprise, and not the records of the tribal government, when applying Program requirements. For example, the financial records of only the tribal economic enterprise should be used for the purpose of determining the Eligible Borrower's EBITDA and outstanding debt (each, an input to the maximum loan size calculation), as well as for determining the application of the security and priority requirements under the MSPLF and MSELF. See questions C.5 and D.11.
- Recourse must be available to the assets of the tribal economic enterprise in a manner that is customary for loans made to such enterprises by an Eligible Lender. While the tribal government may be the "borrower" in name, recourse to the assets of the government that are separate from those of the enterprise may be limited in alignment with the Eligible Lender's typical standards for such lending.
- An Eligible Lender must determine, based on its own due diligence and advice from experienced in-house or outside counsel, that the tribal economic enterprise either does not have sovereign immunity or the tribe has effectively waived it such that U.S. federal courts, in addition to any state court as may be agreed, may be among courts of competent jurisdiction for matters resulting from the Main Street loan transaction. Such waiver must extend to the Borrower Certifications and Covenants, Assignment-in-Blank, and Co-Lender Agreement, as each is applicable.
- The tribal economic enterprise must meet all other criteria for being an Eligible Borrower, as set out in question E.1.
- The principal executive officer and principal financial officer of the Business (i.e., the separate tribal economic enterprise) must be signatories to the Borrower certifications.

Other forms of organization may be considered for inclusion as an Eligible Borrower under the Program at the discretion of the Federal Reserve.

### E.3. How should a Business count employees for purposes of determining eligibility under the Program?

To be an Eligible Borrower, a Business must meet at least one of the following two conditions: (a) the Business has 15,000 employees or fewer, or (b) the Business has 2019 annual revenues of $5 billion or less. To determine how many employees a Business has, it should follow the framework set out in the SBA's regulation at 13 CFR 121.106. As set out in 13 CFR 121.106, the Business should count as employees all full-time, part-time, seasonal, or otherwise employed persons, excluding volunteers and independent contractors. Businesses should count their own employees and those employed by their affiliates. In order to determine the applicable number of employees, Businesses should use the average of the total number of persons employed by the Eligible Borrower and its affiliates for each pay period over the 12 months prior to the origination or upsizing of the Main Street loan.

### E.4. How should a Business calculate 2019 revenues for purposes of determining eligibility under the Program?

To be an Eligible Borrower, a Business must meet at least one of the following two conditions: (a) the Business has 15,000 employees or fewer, or (b) the Business has 2019 annual revenues of $5 billion or less. To determine its 2019 annual revenues, Businesses must aggregate their revenues with those of their affiliates. Businesses may use either of the following methods to calculate 2019 annual revenues for purposes of determining eligibility:

(1) A Business may use its (and its affiliates') annual "revenue" per its 2019 U.S. Generally Accepted Accounting Principles-based (U.S. GAAP) audited financial statements; or

(2) A Business may use its (and its affiliates') annual receipts for the fiscal year 2019, as reported to the Internal Revenue Service. For purposes of the Program, the term "receipts" has the same meaning used by the SBA in 13 CFR 121.104(a).

If a potential borrower (or its affiliate) does not yet have audited financial statements or annual receipts for 2019, the borrower (or its affiliate) should use its most recent audited financial statements or annual receipts.

Please see question H.10 with regard to financial records required for other Borrower Certifications and Covenants. Please see Appendix C for the financial records requirements for ongoing financial reporting.

### E.5. Which entities are a Business's affiliates for purposes of the employee and revenue eligibility criteria?

To determine eligibility, a Business's employees and 2019 revenues are calculated by aggregating the employees and 2019 revenues of the Business itself with those of the Business's affiliated entities in accordance with the affiliation test set forth in 13 CFR 121.301(f) (1/1/2019 ed.).

### E.6. Are non-profit organizations eligible to borrow under the Program?

Yes. As of September 4, 2020, the NONLF and NOELF, each a Main Street facility open to nonprofit organizations, are operational. A separate document, available here, addresses FAQs about these facilities.

### E.7. Will an alternative underwriting metric be developed for asset-based borrowers?

EBITDA is the key underwriting metric required for the MSNLF, MSPLF, and MSELF. The Federal Reserve and the Treasury Department have considered expansions of Main Street to include lending based on collateral values and have determined that conditions do not warrant such changes at this time. We will continue to monitor credit conditions carefully and adjust the Program as appropriate.

### E.8. What does "significant operations in the United States" mean?

To determine if an Eligible Borrower has "significant operations" in the United States, the Business's operations should be evaluated on a consolidated basis together with its subsidiaries, but not its parent companies or sister affiliates. For example, an Eligible Borrower has significant operations in the United States if, when consolidated with its subsidiaries, greater than 50% of the Eligible Borrower's:

- assets are located in the United States;
- annual net income is generated in the United States;
- annual net operating revenues are generated in the United States; or
- annual consolidated operating expenses (excluding interest expense and any other expenses associated with debt service) are generated in the United States.

This is a non-exhaustive list of examples that reflects the principles that should be applied by a potential borrower when evaluating its eligibility under this criterion.

### E.9. Can a U.S. company that is a subsidiary of a foreign company qualify as an Eligible Borrower?

An Eligible Borrower must be created or organized in the United States or under the laws of the United States. For the avoidance of doubt, an Eligible Borrower may be a subsidiary of a foreign company, provided that the borrower itself is created or organized in the United States or under the laws of the United States, and the borrower on a consolidated basis has significant operations in and a majority of its employees based in the United States. However, an Eligible Borrower that is a subsidiary of a foreign company must use the proceeds of a Main Street loan only for the benefit of the Eligible Borrower, its consolidated U.S. subsidiaries, and other affiliates of the Eligible Borrower that are U.S. businesses. The proceeds of a Main Street loan may not be used for the benefit of such Eligible Borrower's foreign parents, affiliates or subsidiaries.

### E.10. Can an otherwise eligible business borrow if its affiliate has already borrowed under a Main Street Facility or the PMCCF?

An affiliated group of companies can participate in only one Main Street facility, and cannot participate in both a Main Street facility and the PMCCF. Therefore, borrowers that are otherwise eligible are subject to the following restrictions:

- If any affiliate of the Business has participated in the PMCCF, the Business may not borrow under any Main Street facility.
- If an affiliate has previously participated, or has a pending application to participate, in a Main Street facility, the Business can only participate in Main Street by using the same Main Street facility accessed by its affiliate. For example, if an Eligible Borrower's affiliate has participated in the MSNLF, then the Eligible Borrower would only be able to participate in the MSNLF and would be prohibited from participating in the MSPLF and MSELF.
- In no case could the affiliated group's total participation in a single Main Street facility exceed the maximum loan size that the entire affiliated group is eligible to receive on a consolidated basis. As result, an Eligible Borrower's maximum loan size would be limited by its own leverage level, the leverage level of the affiliated group on a consolidated basis, and the size of any loan extended to other affiliates in the group. For example, in the case of the MSNLF, the Eligible Borrower's maximum loan size would be the lesser of:
  (1) $35 million (less any amount extended to an affiliate of the Eligible Borrower under the MSNLF);
  (2) an amount that, when added to the Eligible Borrower's existing outstanding and undrawn available debt, does not exceed four times the Eligible Borrower's adjusted 2019 EBITDA; or
  (3) an amount that, when added to the Eligible Borrower's affiliated group's existing outstanding and undrawn available debt, does not exceed four times the entire affiliated group's adjusted 2019 EBITDA.

For the avoidance of doubt, if an Eligible Borrower is the only Business in its affiliated group that has sought funding through Main Street, its affiliated group's debt and EBITDA are not relevant to determining whether that Business can qualify, except to the extent that the Borrower's subsidiaries are consolidated into its financial statements. (See question H.10 for more information on consolidated financial statements.) If the Eligible Borrower has an affiliate(s) that has previously borrowed or has an application pending to borrow from a Main Street facility, then the entire affiliated group's debt and EBITDA are relevant to the determining the Eligible Borrower's maximum loan size.

For more information on how to identify an Eligible Borrower's affiliates, see question E.5 above.

### E.11. Is a private equity fund eligible to borrow under the Program?

No. As provided in the Program term sheets and question E.1, to be an Eligible Borrower under the Program, a Business must not be an Ineligible Business listed in 13 CFR 120.110, as modified and clarified by SBA regulations for purposes of the PPP on or before April 24, 2020. SBA has determined that private equity funds are primarily engaged in investment or speculation, and that such Businesses are therefore ineligible to receive PPP loans under 13 CFR 120.110(s). See SBA PPP Interim Final Rule at 85 Fed. Reg. 23450 (released by the SBA on April 24, 2020).

### E.12. Is a portfolio company of a private equity fund eligible to borrow under the Program?

As provided in question E.5, to determine eligibility, a Business's employees and 2019 annual revenues are calculated by aggregating the employees and the 2019 annual revenues of the Business itself with those of the Business's affiliated entities in accordance with the affiliation test set forth in 13 CFR 121.301(f) (1/1/2019 ed.). This affiliation test applies to private equity-owned Businesses in the same manner as any other Business subject to outside ownership or control.[^8]

For example, assume Business X seeks to borrow under the Program. Business X has fewer than 15,000 employees and its 2019 annual revenues were below $5 billion. However, Business Y owns more than 50% of the voting equity of Business X and Businesses A, B, C, and D. As a result, Businesses A, B, C, D, X, and Y are all affiliated entities. 13 CFR 121.301(f)(1) and (3) (1/1/2019 ed.). In order for Business X to be an Eligible Borrower under the Program, it must meet one of the following two conditions: (a) the aggregate number of employees of Business X and its affiliated entities must be 15,000 or fewer; or (b) the aggregate 2019 annual revenues of Business X and its affiliated entities must be $5 billion or less. See 13 CFR 121.301(f)(6) (1/1/2019 ed.).

[^8]: The SBA affiliation exceptions in 13 CFR 121.103(b) apply to the Program, including the exception for business concerns owned in whole or substantial part by investment companies licensed under the Small Business Investment Act of 1958, as amended. See 13 CFR 121.301(f)(7) (1/1/2019 ed.).

### E.13. Are Eligible Lenders required to adopt any special compliance procedures to verify that a Borrower is not an "Ineligible Business" under 13 CFR 120.110(o)?

No. The terms of the Program do not impose any verification or other obligations on an Eligible Lender specifically in relation to 13 CFR 120.110(o). As a general matter, Eligible Lenders that are subject to regulations designed to prevent improper insider lending (e.g., the Board's Regulation O (12 CFR part 215)) should maintain compliance with those pre-existing rules and regulations without exception or modification for Main Street.

Under the standard of reasonable, good-faith diligence specified in the Borrower Certifications and Covenants, each prospective Main Street borrower is expected to review the list of Ineligible Businesses in 13 CFR 120.110(b)-(j) and (m)-(s), and make a reasonable, good-faith effort to determine if its activities or ownership would cause it to be classified within one of the listed ineligible categories, including 13 CFR 120.110(o).

For purposes of Main Street only,[^9] no borrower shall be deemed ineligible based solely on ownership by the Eligible Lender and its corporate affiliates of equity interests in the borrower that do not in the aggregate exceed five percent of the borrower's total outstanding equity interests. This five percent "safe harbor" would apply, for instance, to a publicly traded borrower where a broker-dealer affiliate of an Eligible Lender holds shares of the borrower, acquired for market-making purposes, in an amount that, taken together with all other equity interests owned by the Eligible Lender and its corporate affiliates, totals less than five percent of the borrower's outstanding equity interests.

### E.14. Is a business operating as a sole proprietorship eligible for a Main Street loan?

No. Sole proprietorships that are not otherwise established under law as a "Business," as defined in question E.2, are not Eligible Borrowers.

[^9]: These FAQs do not apply to or affect any other programs, such as the PPP or 7(a) lending programs administered by the SBA.

### E.15. [Reserved.]

### E.16. [Reserved.]

### E.17. [Reserved.]

### E.18. [Reserved.]

### E.19. [Reserved.]

## F. Application Process

### F.1. How can I apply for a Program loan?

To obtain a loan under the Program, an Eligible Borrower must submit an application and any other documentation required by an Eligible Lender to such Eligible Lender. Eligible Borrowers should contact an Eligible Lender for more information on whether the Eligible Lender plans to participate in the Program and to request more information on the application process. For a list of Eligible Lenders that are currently accepting applications from new customers, see here. Updates regarding the Program will be made available on the Board's Main Street page.

### F.2. Is a Business eligible to borrow if it receives a PPP loan or Economic Injury Disaster loan (EIDL)?

A Business that receives a loan through the SBA's PPP or EIDL program can be an Eligible Borrower under Main Street if it meets the Eligible Borrower criteria.

### F.3. Do Eligible Borrowers qualify automatically for a loan under the Program?

No. The Main Street facility term sheets contain requirements that must be satisfied for a loan to be eligible for participation by the Main Street SPV. At the time of the potential borrower's application, an Eligible Lender is expected to assess each borrower's pre-pandemic financial condition and post-pandemic prospects, while also taking into account the payment deferral features in Main Street loans. An Eligible Lender may require additional information and documentation in making this evaluation and will ultimately determine whether an Eligible Borrower is approved for a Program loan in light of these considerations. Businesses that otherwise meet the Eligible Borrower requirements may not be approved for a loan or may not receive the maximum allowable amount.

### F.4. Can an Eligible Borrower apply for a Main Street loan through multiple Eligible Lenders?

An Eligible Borrower may submit applications for a Main Street loan to more than one Eligible Lender. However, an Eligible Borrower is required to notify each Eligible Lender to which it submits an application of any other pending or accepted applications. This requirement is reflected in Section 5.E of the Borrower Certifications and Covenants.

If an Eligible Borrower's application for a Main Street loan is declined by an Eligible Lender, the Eligible Borrower may apply through a different Eligible Lender.

## G. Terms and Conditions

### G.1. How will adjusted 2019 EBITDA be calculated?

For the MSNLF and MSPLF, the methodology an Eligible Lender requires an Eligible Borrower to use when calculating its adjusted 2019 EBITDA must be a methodology the Eligible Lender previously required to be used for adjusting EBITDA when extending credit to the Eligible Borrower or to similarly situated borrowers on or before April 24, 2020.

For MSELF Eligible Loans, the methodology an Eligible Lender requires an Eligible Borrower to use when calculating its adjusted 2019 EBITDA must be the methodology the Eligible Lender previously required to be used for adjusting EBITDA when originating or amending the underlying loan on or before April 24, 2020.

### G.2. How will "existing outstanding and undrawn available debt" be calculated?

"Existing outstanding and undrawn available debt" includes all amounts borrowed under any loan facility, including unsecured or secured loans from any bank, non-bank financial institution, or private lender, as well as any publicly issued bonds or private placement facilities, regardless of its position in the borrower's capital structure.[^10] It also includes all unused commitments under any loan facility, excluding (1) any undrawn commitment that serves as a backup line for commercial paper issuance, (2) any undrawn commitment that is used to finance receivables (including seasonal financing of inventory),[^11] (3) any undrawn commitment that cannot be drawn without additional collateral, and (4) any undrawn commitment that is no longer available due to change in circumstance.[^12] Existing outstanding and undrawn available debt should be calculated as of the date of the loan application.

[^10]: For example, subordinated debt and debt with deferred principal and interest payments should be included in the definition of debt and, therefore, covered under this FAQ.

[^11]: If an undrawn loan facility is used to finance seasonal inventory as well as inventory that is not considered seasonal, then the Eligible Lender should include only the amount of undrawn debt that could be advanced on the Eligible Borrower's non-seasonal inventory as of the date of the loan application.

[^12]: In addition, as explained in question G.16, PPP loans can be excluded from "existing outstanding and undrawn debt" under certain specified conditions.

### G.3. Why are Program loans based on LIBOR rather than SOFR?

The Federal Reserve received feedback from potential participants that quickly implementing new systems to issue loans based on SOFR would require diverting resources from challenges related to the pandemic. Although financial institutions are transitioning to more robust reference rates, LIBOR remains the most common base rate used in business lending, even though firms cannot rely on LIBOR being published after the end of 2021. Consistent with the recommendations of the Alternative Reference Rates Committee (ARRC), Eligible Lenders and Eligible Borrowers should include fallback contract language to be used should LIBOR become unavailable during the term of the loan. ARRC recommended fallback language can be found at https://www.newyorkfed.org/arrc/fallbacks-contract-language.

### G.4. When do I need to start paying interest and principal on my loan?

No payments of principal will be required for the first two years of an MSNLF Loan, MSPLF Loan, or MSELF Upsized Tranche, and no payments of interest will be required during the first year of an MSNLF Loan, MSPLF Loan, or MSELF Upsized Tranche. Unpaid interest will be capitalized in accordance with the Eligible Lender's customary practices for capitalizing interest (e.g., at quarter-end or year-end). After the first year interest will be payable in accordance with the loan agreement for the MSNLF Loan, MSPLF Loan, or MSELF Upsized Tranche.

### G.5. How will principal be amortized after the second year?

No principal is paid in the first or second year. The loan will be amortized over the remaining term of the loan, with 15% of principal due at the end of year 3, 15% of principal due at the end of year 4, and a balloon payment of 70% of principal due at maturity at the end of year 5. For purposes of this question, principal includes capitalized interest. Eligible Lenders will provide Eligible Borrowers with payment information during the Program loan origination process.

### G.6. Is collateral required for Main Street loans?

MSNLF Loans, MSPLF Loans, and MSELF Upsized Tranches may be secured or unsecured, although collateral may be required for MSPLF Loans and MSELF Upsized Tranches due to the Eligible Borrower's other loans and debt instruments, as explained further in questions C.5 and D.11, respectively.

An MSELF Upsized Tranche must be secured if the underlying loan is secured. In such case, any collateral securing the underlying loan (at the time of upsizing or on any subsequent date) must secure the MSELF Upsized Tranche on a pari passu basis. Under such an arrangement, if the borrower defaults, the SPV and lender(s) would share equally in any collateral available to support the loan relative to their proportional interests in the loan (including the MSELF Upsized Tranche). Eligible Lenders can require Eligible Borrowers to pledge additional collateral to secure an MSELF Upsized Tranche as a condition of approval.

### G.7. Are there fees associated with Main Street loans?

Yes, there are fees associated with the MSNLF, MSPLF, and MSELF.

- **MSNLF and MSPLF:**
  - *Transaction Fee:* If the initial principal amount of the Eligible Loan is $250,000 or greater, Eligible Lenders will pay the Main Street SPV a transaction fee of 100 basis points of the principal amount of the MSNLF or MSPLF Loan at the time of origination, and may pass on this fee to Eligible Borrowers.[^13] No transaction fee will be imposed if the initial principal amount of the Eligible Loan is less than $250,000.
  - *Loan Origination Fee:* If the initial principal amount of the Eligible Loan is $250,000 or greater, the Eligible Borrower will pay the Eligible Lender a fee of up to 100 basis points of the principal amount of the MSNLF or MSPLF Loan at the time of origination. If the initial principal amount of the Eligible Loan is less than $250,000, an Eligible Borrower will pay an Eligible Lender an origination fee of up to 200 basis points of the principal amount of the Eligible Loan at the time of origination. Eligible Lenders have discretion over whether and when to charge Eligible Borrowers this fee.
  - *Loan Servicing Fee:* If the initial principal amount of the Eligible Loan is $250,000 or greater, the SPV will pay an Eligible Lender 25 basis points of the principal amount of its participation per annum for loan servicing. If the initial principal amount of the Eligible Loan is less than $250,000, the SPV will pay an Eligible Lender 50 basis points of the principal amount of its participation in the Eligible Loan per annum for loan servicing. Eligible Lenders should consult the Servicing Agreement for more information.
- **MSELF:**
  - *Transaction Fee:* Eligible Lenders will pay the Main Street SPV a transaction fee of 75 basis points of the principal amount of the MSELF Upsized Tranche at the time of upsizing, and may choose to pass on this fee to Eligible Borrowers.
  - *Loan Origination Fee:* The Eligible Borrower will pay an Eligible Lender a fee of up to 75 basis points of the principal amount of the MSELF Upsized Tranche at the time of upsizing. Eligible Lenders have discretion over whether and when to charge Eligible Borrowers this fee.
  - *Loan Servicing Fee:* The SPV will pay an Eligible Lender 25 basis points of the principal amount of its participation per annum for loan servicing. Eligible Lenders should consult the Servicing Agreement for more information.

[^13]: The transaction fee, where applicable, will be based on the principal amount of the MSNLF Loan, MSPLF Loan, or MSELF Upsized Tranche at the time a loan participation is submitted for sale to the Main Street SPV. Where deferred interest has been capitalized and added to the principal amount and purchase amount, the transaction fee will be based on the principal amount including such capitalized interest. As indicated in question G.4, unpaid interest should be capitalized in accordance with the Eligible Lender's customary practices for capitalizing interest (e.g., at quarter-end or year-end). The Federal Reserve does not expect that interest would be capitalized more frequently than monthly, and thus only expects capitalized interest to affect this calculation where loans were extended at least one month prior to July 6, 2020—the date upon which the Main Street Portal began accepting submissions of loans for sale of participation interests.

### G.8. What constitutes "commercially reasonable efforts" to maintain payroll and retain employees?

Eligible Borrowers should make commercially reasonable efforts to retain employees during the term of the MSNLF Loan, MSPLF Loan, or MSELF Upsized Tranche. Specifically, an Eligible Borrower should undertake good-faith efforts to maintain payroll and retain employees, in light of its capacities, the economic environment, its available resources, and the business need for labor. Borrowers that have already laid-off or furloughed workers as a result of the disruptions from COVID-19 are eligible to apply for Main Street loans.

### G.9. Can an Eligible Borrower receive more than one Main Street loan?

An Eligible Borrower may only participate in one of the Main Street facilities: the MSNLF, the MSPLF, the MSELF, the NONLF, or the NOELF. However, an Eligible Borrower may receive more than one loan under a single Main Street facility, provided that the sum of MSNLF Loans cannot exceed $35 million; the sum of MSPLF Loans cannot exceed $50 million; and the sum of MSELF Upsized Tranches cannot exceed $300 million.

While Eligible Borrowers are permitted to receive more than one loan from a single Main Street facility, the Main Street SPV will not accept more than one loan made to a single Eligible Borrower by the same Eligible Lender with an initial principal amount of less than $250,000 within 60 days. This restriction is intended to prevent Eligible Lenders from originating multiple loans with an initial principal amount of less than $250,000 to the same Eligible Borrower in order to benefit from the fee structure.

### G.10. Can an Eligible Borrower receive a loan if its maximum loan size under a facility's term sheet test is below the minimum loan size for the same facility?

No, borrowers may not receive a loan that is below the minimum loan size, which is $100,000 for MSNLF Loans and MSPLF Loans, and $10 million for MSELF Upsized Tranches.

### G.11. How can an Eligible Borrower determine if its existing loans had an internal risk rating equivalent to a "pass" in the FFIEC's supervisory rating system on December 31, 2019?

If an otherwise Eligible Borrower applies for a loan at an Eligible Lender with which it has an outstanding loan, the Eligible Lender will make the determination of whether the borrower's existing loans have an internal risk rating that meets the requirements in the Main Street term sheets. The Eligible Lender will also assess the potential borrower's pre-pandemic financial condition and post-pandemic prospects at the time of the application.

### G.12. Can a Lender charge a Borrower additional fees above the Main Street origination fee and/or an interest rate above LIBOR + 300 basis points?

Eligible Lenders are allowed to charge Eligible Borrowers a one-time origination fee as set out in the Main Street term sheets. In addition, if a transaction fee is imposed (i.e., if the initial principal amount of the Eligible Loan is $250,000 or greater), Eligible Lenders may also require Eligible Borrowers to pay the transaction fee, which the Eligible Lenders must in turn pay to the Main Street SPV. Eligible Lenders are not permitted to charge Eligible Borrowers any additional fees, except de minimis fees for services that are customary and necessary in the Eligible Lender's underwriting of commercial and industrial loans to similar borrowers, such as appraisal and legal fees. Eligible Lenders may also charge customary consent fees if such fees are necessary to amend existing loan documentation in the context of upsizing a loan in connection with the MSELF.[^14] Eligible Lenders should not charge servicing fees to Eligible Borrowers.

Main Street loans must have an interest rate of LIBOR (1 month or 3 month) plus 300 basis points.

[^14]: Customary consent fees may also be charged if the Eligible Borrower's other loans or debt instruments need to be amended in order to facilitate the origination of a new MSNLF Loan or MSPLF Loan.

### G.13. What methodology should be used to adjust EBITDA if an Eligible Lender has used a range of methods in the past with respect to a single Eligible Borrower or similarly situated borrowers?

An Eligible Lender should require the Eligible Borrower to adjust its 2019 EBITDA by using the methodology that the Eligible Lender has previously required for EBITDA adjustments when extending credit to the Eligible Borrower or, if the Eligible Borrower is a new customer, similarly situated borrowers on or before April 24, 2020. If an Eligible Lender has used multiple EBITDA adjustment methods with respect to the Eligible Borrower or similarly situated borrowers (e.g., one for use within a credit agreement and one for internal risk management purposes), the Eligible Lender should choose the most conservative method it has employed. In all cases, the Eligible Lender must select a single method used at a point in time in the recent past and before April 24, 2020. The Eligible Lender may not "cherry pick" or apply adjustments used at different points in time or for a range of purposes. The Eligible Lender should document the rationale for its selection of an adjusted EBITDA methodology.

### G.14. For purposes of adjusting EBITDA, how does an Eligible Lender identify "similarly situated borrowers"?

Similarly situated borrowers are borrowers in similar industries with comparable risk and size characteristics. Eligible Lenders should document their process for identifying similarly situated borrowers when they originate an MSNLF Loan or an MSPLF Loan.

### G.15. Why is the Federal Reserve allowing adjustments to EBITDA for purposes of Main Street when it has noted supervisory concerns with these adjustments in the past? Is there a limit to how much EBITDA can be adjusted?

It is normal industry practice for lenders and borrowers to agree to adjust a borrower's EBITDA to accommodate differences in business models across industries and to accom

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