Federal Reserve Expands Non-Profit Loan Options

July 23, 2020

Late last week, the Federal Reserve Board announced an expansion of the Main Street Lending Program to provide greater access to credit for 501(c)(3) and 501(c)(19) nonprofit organizations, including hospitals, educational institutions and social service organizations. The announcement details two new loan options, Nonprofit New Loans and Nonprofit Expanded Loans, which are available to organizations that were on sound financial footing prior to the pandemic and meet eligibility requirements that include having:

  • Minimum of 10 employees;
  • Total non-donation revenues equal to or greater than 60% of expenses for the period from 2017 to 2019;
  • 2019 operating margin of 2% or more;
  • 60 days cash on hand; and
  • Debt repayment capacity – ratio of cash, investments and other resources to outstanding debt and certain other liabilities ¬– of greater than 55%.

The Main Street Lending Program was established by the Treasury Secretary and includes $75 billion provided through the CARES Act. Under the expanded non-profit options, organizations may apply for five-year loans between $250,000.00 to $10 million at an interest rate of LIBOR + 3%. Interest payments are deferred for one year.