New $ 600 billion Covid-19 loan program could help seniors’ lives after PPP shutdown
A surge in interest has depleted the $ 350 billion wage protection program (PPP) in just under two weeks – but the senior residence businesses that have missed these loans may not yet be in. short of options.
Homeowners and operators of senior housing facing cash flow issues due to the Covid-19 pandemic may find relief in the new Main Street Loan Program. The program aims to help small and medium-sized businesses that were in good financial health before the start of the pandemic. And with $ 600 billion available to borrowers, the program is bigger than the PPP, which means it should last longer, but there are key differences between the two.
Perhaps the biggest difference is that loans made under the Main Street Loan program are not forgivable. Some loans under the PPP functioned more like grants, as long as borrowers met certain conditions regarding the maintenance of the payroll throughout the pandemic. But loans under the Main Street program will work like a regular loan, albeit with lower interest rates and a more favorable-than-normal repayment window, according to Kimberly Wachen, senior partner of the firm’s real estate group. attorneys Arent Fox.
“The PPP loan could be thought of as free money,” Wachen told Senior Housing News. “It’s cheap money, but you have to pay it back.”
The PPP was launched on April 3 with the intention of giving small businesses across the country much needed money after the shutdown of the US economy due to the Covid-19 pandemic. But the demand for forgivable loans was high and the program lack of money barely two weeks after its start.
The Main Street Loan Program could fill the void, even for providers who have also applied for a P3 loan. Businesses that have up to 10,000 employees or up to $ 2.5 billion in annual revenue in 2019 are eligible for the loans. The program is divided into two facilities: the new Main Street loan facility for borrowers applying for new loans; and the Extended Main Street Loan Facility for borrowers looking to increase the amount of an existing loan.
For the new loan facility, the loans have a minimum size of $ 1 million and a maximum size which is the lesser of $ 25 million or an amount that does not exceed four times earnings before interest, taxes, Depreciation and Amortization (EBITDA) when added to existing debt outstanding and committed from the borrower but not used.
The Extended Loan Facility, on the other hand, provides funding with an existing term loan that was taken out on or before April 8. These loans have a minimum size of $ 1 million and a maximum size which is the lesser of: $ 150 million; 30% of a borrower’s existing unused debt; or an amount that does not exceed six times earnings before interest, taxes, depreciation and amortization (EBITDA) when added to the borrower’s existing debt outstanding and committed but not used.
The loans are also expected to have a term of four years to maturity and additional interest rates from the guaranteed overnight funding rate – which was 1.2% Thursday, Wachen said – plus 2.5 % to 4%. Additionally, principal and interest rates are deferred for one year under the program, giving borrowers some leeway to return to normal operations before they need to start making payments.
Still, there are a few unknowns about the new loan program. On the one hand, it’s unclear exactly how the federal government will define EBITDA, Wachen said. The government has also not issued any regulations for the program, casting doubt on its exact specifications. And it’s not clear if there will be any restrictions on how providers can spend that money, as PPP has dictated.
The good news for borrowers is that because the new loan program has a larger cash pool and lenders will need to do due diligence with any loan under the program, the loan program under the program Main Street will probably last more than two weeks.
“I wouldn’t expect it to go as fast as PPP,” Wachen said.