Title IV of the Coronavirus Aid, Relief and Economic Security (CARES) Act enacted on March 27, 2020, included a subtitle provision called the Coronavirus Economic Stabilization Act of 2020, which provides additional emergency relief to certain businesses that may not have been eligible for other funding under the CARES Act.
Shortly thereafter, the Federal Reserve announced the establishment of the Main Street Lending Program (the Program) to help facilitate roughly $600 billion in financing to small and midsize businesses in relation to Title IV. The Federal Reserve subsequently released term sheets about the programs, which defined criteria and restrictions for eligible lenders and eligible borrowers.
At the time, an eligible borrower did not include not-for-profit (NFP) organizations.
On June 15, 2020, the Federal Reserve Board released a proposal to expand the Program to provide credit to small and midsize eligible NFP organizations. The week-long comment period provided feedback on the proposed loan terms and conditions
Finally on July 17, 2020, the Federal Reserve modified the Program to include not-for-profit organizations exempt under sections 501(c)(3) and 501(c)(19) to provide these organizations with greater access to credit.
Baker Tilly’s specialists compiled a list of frequently asked questions to help guide you through the provisions for NFP organizations to determine potential eligibility for your organization.
The Program’s NFP loans will be made available under two facilities: the Nonprofit Organization New Loan Facility (NONLF) and the Nonprofit Organization Expanded Loan Facility (NOELF). The NONLF will allow eligible lenders to originate loans for eligible NFP organizations, and the NOELF will allow for additional credit on loans previously entered into by eligible NFP organizations via an upsized tranche. Eligible NFP organizations should have been in “sound financial condition before the coronavirus pandemic.”
Only NFP organizations described in sections 501(c)(3) and 501(c)(19) of the Internal Revenue Code are considered eligible organizations under the Program. The Federal Reserve may open up the Program to other types of NFP organizations at a later date.
The Federal Reserve requested comments via email on its website through June 22, 2020. Changes made to the NFP facilities from the original term sheets and as a result of the comments received include: a lower minimum employment threshold from 50 employees down to 10; a reduction of the required operating margin from 5% to 2%; and a reduction in the required current days cash on hand from 90 days to 60 days. These changes are reflected in the table of loan provisions and eligible borrower criteria listed below.
Applications, registration and other borrower and lender information can be found on the Federal Reserve Bank of Boston’s website. The current forms and agreements featured on the website do not yet reflect the expansion of the Program to NFPs. We will provide further updates once these forms and agreements are revised and are available.
Yes. NFP organizations that received PPP loans are permitted to borrow under the Program, provided they meet the eligible borrower criteria as outlined below.
At this point, any loan under the Program will not be eligible for partial or full forgiveness.
An eligible borrower is an NFP organization that:
An Ineligible Business includes: financial businesses primarily engaged in the business of lending; passive businesses owned by developers and landlords that do not actively use or occupy the assets acquired or improved with the loan proceeds; life insurance companies; businesses located in a foreign country; private clubs and businesses which limit the number of memberships for reasons other than capacity; government-owned entities (except for businesses owned or controlled by a Native American tribe); and loan packagers earning more than one third of their gross annual revenue from packaging SBA loans. See the SBA website for the full list of ineligible businesses.
All facilities under the Program are set to expire on Sept. 30, 2020, unless the Board of Governors of the Federal Reserve System and the Treasury Department extend the Facilities.
For more information on this topic or to learn how Baker Tilly specialists can help, contact our team.
(1)See Federal Reserve term sheet at
(2)See Federal Reserve term sheet at
(3)The eligible lender will be assessed a 100 basis point transaction fee, and can choose to pass down to the EB.
(4)Expenses equal total expenses minus depreciation, depletion and amortization.
(5)"Donations” include proceeds from fundraising events, federated campaigns, gifts, donor-advised funds, and funds from similar sources, but exclude (i) government grants, (ii) revenues from a supporting organization, (iii) grants from private foundations that are disbursed over the course of more than one calendar year, and (iv) any contributions of property other than money, stocks, bonds, and other securities (noncash contributions), provided that such noncash contribution is not sold by the organization in a transaction unrelated to the organization’s tax-exempt purpose.
(6)The methodology used by the eligible lender to calculate adjusted 2019 EBIDA must be the methodology it has previously used for adjusting EBIDA when extending credit to the eligible borrower or similarly situated borrowers on or before June 15, 2020. The eligible lender should calculate operating revenue as unrestricted operating revenue, excluding funds committed to be spent on capital, and including a proxy for endowment income in place of unrestricted investment gains or losses. The methodology used by the eligible lender to calculate the proxy for endowment income must be the methodology it has used for the eligible borrower or similarly situated borrowers on or before June 15, 2020.
(7)For purposes of this requirement, “liquid assets” is defined as unrestricted cash and investments that can be accessed and monetized within 30 days. An organization may include in “liquid assets” the amount of cash receipts it reasonably estimates to receive within 60 days related to the provision of services, facilities, or products, or any other program service that exceed its reasonably estimated cash outflows payable within the same 60-day period.
(8)The Primary Market Corporate Credit Facility was also established as a result of the CARES Act and will support credit to employers through new bond and loan issuance.
(9)The Municipal Liquidity Facility was established to help state and local governments through the purchase of short-term notes directly from U.S. states and certain U.S. counties and U.S. cities.
(10)Other emergency relief support under Subtitle A included loans, loan guarantees and other investments made for passenger air carriers, cargo air carriers and businesses critical to maintaining national security.
(11)The exception is an employee whose compensation is determined through an existing collective bargaining agreement entered into prior to March 1, 2020.
(12)Compensation is defined in Sec. 4004(b) as “salary, bonuses, awards of stock and other financial benefits.”