The Federal Reserve Board (FRB) announced several favorable changes to its Main Street Lending Program (MSLP), which was developed under the CARES Act to help provide small- and medium-size businesses additional liquidity to respond to the pandemic. The program as initially announced precluded Main Street Loan recipients from paying dividends or other capital distributions for any purpose for up to 12 months after the loan is outstanding. In comments to the FRB NADA explained that this broad restriction would unnecessarily preclude pass-through entities from paying dividends to satisfy shareholder tax obligations. In response, the FRB changed this limitation to provide 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.” This essential change removes an element of the MSLP that would have precluded dealers from considering it as a viable means to enhance their liquidity.

Dealers who receive a loan through the Paycheck Protection Program are eligible for an MSLP loan if they otherwise qualify. Dealers are encouraged to review the FRB’s revised term sheets for its various MSLP lending facilities as well as the frequently asked questions it issued today to explain the program in greater detail.

Mike Alford
Chairman, Regulatory Affairs Committee