Paying More Attention to the Fed’s Main Street Loans

Al Givray

Al Givray, Partner, Davis Graham & Stubbs LLP

The following analysis was prepared for ARSA by Al Givray, law partner at the law firm of Davis Graham & Stubbs in Denver, Colorado, and general counsel to The NORDAM Group LLC in Tulsa, Oklahoma. He can be reached by email at You can learn more about Mr. Givray’s experience at: and

To keep tabs on all of ARSA’s work related to the current pandemic, visit

CARES ACT Title IV – The Main Street Lending Program

The Fed’s Main Street Lending Program gives companies with up to 10,000 workers or revenues less than $2.5 billion reasons to borrow money from a $600 billion bucket. If the company is backed by venture capital or private equity, these monies can be more attractive than an SBA loan or the Treasury-direct loan. The Main Street bucket contemplates a company taking out a new loan or adding to an existing loan, including those given under the SBA’s Paycheck Protection Program (according to the Fed’s announcement).

Of course, you and your lender must qualify. Your qualifications are the size and money numbers above, and employing a majority of your workers in the United States. Lender will qualify by being one of the many “U.S. insured depository institutions, U.S. bank holding companies, [or] U.S. savings and loan holding companies.”

Happily, the qualified lender keeps only 5% of the credit risk, with the Fed picking up 95% through its special purpose vehicle structure with an investment from the US Treasury and all the darling rules that bring so much joy to finance experts. Nevertheless, if your leverage and other metrics are not the best, this feature can help.

Other positive features: New loans do not require new collateral, the loan will be unsecured, have a 4-year maturity, have amortization of principal and interest deferred for 1 year, carry an adjustable rate of SOFR + 250-400 basis points, and be a minimum of $1 million, with a maximum of either $25M or an amount that, when added to your “existing outstanding and committed but undrawn debt” (beware of that loaded term), does not exceed four times your EBITDA (another loaded term leverage), allow prepayment without penalty.

If you’re looking to expand an existing loan you have with a Fed-eligible lender, there will be some additional traffic rules you’ll have to follow. See the expanded loan term sheet for details.

The Fed’s guidelines leave plenty of unanswered questions: How do you calculate the “four times” leverage? Total leverage? Secured leverage? Something else? With the different ways to calculate EBITDA, which formulation will be used? The guidelines are silent on these tough questions, but comments submitted by interested parties (they’re due April 16) may shed light on these drivers.

The fine print and strings on Main Street loans, while not as stringent as the analogous restrictions on Treasury-direct loans under Title IV, include attesting that the company will—

  • Not use the loan proceeds to pay off existing debt (except for existing loans requiring mandatory principal payments);
  • Make reasonable efforts to maintain the payroll and employees during the term of the loan;
  • Abide by the executive compensation restrictions in the CARES Act; and
  • The restrictions stated in Section 4003(c)(3)(A)(ii) of the CARES Act barring stock repurchases and capital distributions.

For the rest of the fine print and strings, see:

Despite the hurdles and fees and the fact attractive features may become unattractive as details are revealed by the Treasury Department, the process will be worth every hour spent for many companies and you can’t be one of them without making a timely application.

Stay tuned for updates as the Fed receives comments on its guidelines and issues more guidance.

Previous analysis from Givray...

4/9/20 - On Paying Proper Attention to Title IV CARES ACT Monies

April 9, 2020

Update: On April 9, the US Treasury announced opening its submission portal for non-SBA applications for loan funds out of buckets one, two and three described in the article below. The deadline is 5:00 p.m. EDT on April 17.  

To access the form, visit:

April 7, 2020

Backed by venture capital or private equity? Having doubts about meeting the Small Business Administration’s size or affiliation tests to access CARES Act relief? Maybe it is time to drill down on getting funds from Title IV of the new law – without impairing operations or imperiling equity.

Why? Rollout of SBA loan money has been rocky (some would call it a disaster). There is a lot of aid money for “SBA-challenged” companies – over $4 trillion when the non-SBA buckets in the CARES Act are leveraged by the US Treasury and the Federal Reserve, as expected. There are restrictions and equity winds to navigate; but liquidity for many outside the SBA universe is and will be available.

To spare the reader of clutter and repetitive messages, here’s a four-step strategy to seeking cash under Title IV of the CARES Act:

1-Act with lightning speed to submit an application for Title IV grant or loan monies.

2-Cast a wide net to tap available/overlapping Title IV programs from the U.S. Treasury or Federal Reserve.

3-Plan to decide on which monies and how much (if any) to draw down.

4-Engage an in-house/outside team leader to navigate the maze and frame decisions for action.

Big picture, Title IV funds will end up in two baskets: Treasury-direct grants/loans and Fed-administered loans.

The initial deadline for seeking Title IV grant money was April 3rd; if you don’t apply by April 27, you probably won’t get any. If you provide any “on airport” services to a passenger air carrier, consider applying for a Title IV grant by that deadline—the fuse is short.

As of April 7, Title IV loan applications are not yet being accepted; details are still being formulated and template agreements framed. But they will appear soon—so be ready to pounce.


(1) The Title IV loan application released by Treasury on April 6

(2) Make up your own mind on the money you’ll want/need.

(3) Analyze the strings attached.

(4) Organize the info you’ll need to populate online applications.

Start with the following questions:

Q1: Will existing loan agreements and lenders permit more debt?

Q2: What collateral can or will be pledged?

Q3: Will debt bring on insolvency?

Assets exceed liabilities?
Will debts be paid as they become due?

If the answers point to “yes, I need the extra liquidity for sure,” now how much—

Q4: How much leverage exists before busting current loan covenants?

Q5: Is any part of the debt publicly traded, and how much is the rating likely to go down?

Q6: What if the details of the new borrowing becomes public?

If the answer is still “yes, I need the liquidity,” continue to study the possibility and strings that will attach so the moment the applications and facilities are available, you can make pounce!

Federal Reserve Loan Programs

There will be a lot of Fed discretion (but a huge loan bucket of $454 billion leverageable to $4 trillion or more). There will be rules on collateralization, taxpayer protection (code for having to give warrants and options on company equity), and solvency. Even so, word on the street is that the Fed loan restrictions will be less onerous than those imposed on Treasury-direct loans.  Fed loans will be more sought after, so prepare well now so you can pounce.

Treasury-Direct Loans

The US Treasury strings are already known; they are not the kind most businesses are used to seeing when borrowing money. There are four buckets

Bucket1: $25 billion for passenger air carriers and Part 145 repair stations.

Bucket2: $4 billion for cargo air carriers.

Bucket3: $17 billion for businesses critical to maintaining national security.

Bucket4: $454 billion:

For US businesses of any size with a majority of employees in the US;
if you haven’t gotten loan relief from another part of the CARES Act; and
if you wish to access one of the programs of the Federal Reserve Bank.

Bucket 4 is Fed-administered, while Buckets 1 to 3 are Treasury-administered.

Rules (i.e., strings) may vary from Bucket to Bucket. For example, some Bucket 4 loans may not require warrant/options in equity like Buckets 1 to 3 require, and other Bucket 4 loans may not have the compensation restrictions like Buckets 1 to 3.  More will be known as more procedures are revealed.

What to gather in preparation?

A—Data on why your business is not able to borrow any more money than you have already borrowed

B—Employment levels on March 24, 2020

C—Total compensation packages greater than $425,000 in 2019

D—Unencumbered collateral (that could be pledged for a CARES ACT loan)

E—Ability to pass two standard solvency tests:  assets>liabilities and ability to meet obligations as they become due

F—Why you should get a loan, i.e., critical to maintaining national security or eligible because (thanks to ARSA’s lobbying) repair stations are specifically eligible under the law

G—What money or economic benefit have you received or do you expect to receive under any other part of the CARES Act (Title IV grants and SBA loans included, if you’ve applied or are planning to apply)

H—U.S. operations, U.S. employees, and changes in employment levels since the January 2020

I—Audited financial statements with footnotes intact and particulars about intercompany debt, parental guarantees, restrictions on taking on more debt, and liens on collateral

J—Details on direct and indirect losses suffered and to be expected by reason of COVID-19.

K—Details on how the loan proceeds will be used to meet financial needs

L—Detailed operating plan for of 2020 and 2021

M—Most dicey:  what warrant, equity interest, or senior debt you’re willing offer to the U.S. Treasury in exchange for the loan

As daunting as all this, it’s not insurmountable.  And as Aristotle would tell us, a good start is half the job. Don’t hesitate to contact the author for further information on negotiating the governmental financial storm to the calmer winds ahead.

If you would like counsel regarding Title IV monies, contact Givray directly via

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