The Main Street Lending Program (“MSLP”), introduced through the CARES Act in 2020, supported lower-middle market businesses who were too large to benefit from the Paycheck Protection Program (PPP) and too small for the Secondary Market Corporate Credit Facility (SMCCF). Loans issued under the Program had a five year maturity, deferral of principal payments for two years, and deferral of interest for one year. From mid-late 2023, borrowers faced their first set of principal payments (15%).
Borrowers who participated in the MSLP generally fell into two buckets: (1) those who took advantage of the capital availability as a contingency and quickly repaid the loan and (2) those whose operations were impacted by covid and deployed the capital (most commonly to bolster working-capital or refinance existing debt). Following their first principal paydown, businesses are revisiting their debt schedules and analyzing their ability to satisfy their obligations (another 15% of principal in 2024 and 70% in 2025).
As structured, MSLP lenders were required to hold 5% of each loan, and the Federal Reserve held the remaining 95%. Due to the imposition of higher capital standards and stringent regulations, many borrowers have found that their bank lacks interest in refinancing the entire loan.
With few MSLP banks participating in refinances, businesses need to explore alternative credit solutions. For some borrowers, the simple solution is to contact a local bank and hope for favorable terms. For others, those seeking the healthiest outcome, tapping the wider capital markets and executing on a more thoughtful sourcing process is essential.
By partnering with Clearcove, borrowers experience a bespoke, full-scope placement process and are exposed to a wide network of bank and non-bank lenders. At Clearcove, it is not about receiving “a” term sheet, it is about receiving “the right” term sheet.
Reach out to Clearcove Advisors to learn more about your MSLP refinancing options.
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