From Jade West, National Association of Wholesaler-Distributors
An issue in the Main Street Lending Program
(MSLP) has arisen that we need to call to your immediate attention.
There is a provision in MSLP New and Expanded Loan Facility term sheets that requires a borrower to calculate and deduct from its maximum loan the amount of its “committed but undrawn debt.” While the apparent intent of this provision is to require a business to use its available debt/credit before taking advantage of MSLP loans, it may have unintended consequences for many wholesaler-distributors.
We understand that the use of committed but undrawn debt to fund inventory needs is wide-spread in wholesale distribution, and have heard from NAW members that the exclusion of that credit from a maximum MSLP loan amount could make them ineligible for a loan because many banks do not allow the companies to draw the entire amount of that committed debt without incurring fees, penalties, restrictions on operations, etc.
The Federal Reserve is accepting comments on the MSLP provisions, but that comment period ends at the close of business today (Thursday, Apr. 16)
. Brief comments may be submitted through a comment form, or a letter may be submitted as an attachment to an email message. Links to both of those options are included below.
NAW has submitted a letter to the Federal Reserve on this issue, with suggested modifications to the term sheets which would remedy the situation. Click here
to read NAW’s letter and recommended modification to the term sheets.
If your company would be impacted by this restriction in the MSLP, please take a few minutes to send a letter or submit a comment to the Fed.
You can submit a brief comment directly via this link:
"Main Street Lending" comments that need to contain attachments or embedded graphics should be submitted via e-mail to firstname.lastname@example.org
Include "Main Street Lending" in the subject line of your message.
For your review or use, the suggested modifications NAW has submitted to the Fed are included below:
- Substitute “available” for “committed” in item five. (Both terms are universally understood terms in asset-based lending, but they mean two very different things.)
- Add the following clarifying language: “For purposes of determining the eligible loan amount (or, for purposes of this provision), an eligible borrower’s existing outstanding and available but undrawn bank debt does not include any amount that, if drawn, would cause the Borrower to suffer fees, penalties, restrictions, or limitations on its operations. Lease financing obligations are also excluded.”
- No change to the term committed in item five.
- Add the following clarifying language: “For purposes of determining the eligible loan amount (or, for purposes of this provision), an eligible borrower’s existing outstanding and committed but undrawn bank debt does not include any amount that is not currently available under the terms of the facility, nor does it include any amount that, if drawn, would cause the Borrower to suffer fees, penalties, restrictions, or limitations on its operations. Lease financing obligations are also excluded.”