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The IPA yesterday submitted a letter to the U.S. Treasury Department (the Treasury) and the Federal Reserve requesting an expansion of the Main Street Lending Program (MSLP) for middle market companies that typically fall within the portfolio of a BDC.

The IPA also joined an industry coalition letter requesting clarification around qualifications for the Small Business Administration’s (SBA) Paycheck Protection Program (PPP).

Loan Expansion for BDC Portfolio Companies

The IPA urged the Treasury and Federal Reserve to make amendments to the Main Street Lending Program, which consists of the Main Street New Loan Facility (MSNLF) and the Main Street Expanded Loan Facility (MSELF) to ensure middle market businesses – many of which are ineligible for PPP and are weeks away from running out of operating capital – are provided with critical financing needed to maintain basic operations. Many of these businesses are held within BDC portfolios.

The amendments requested include: 

  • Raising leverage limits to 6x EBITDA for the MSNLF and 8x EBITDA for the MSELF to more accurately reflect the balance sheets of these businesses, therefore increasing access to each facility.
  • Allowing the use of adjusted EBITDA for MSLP lending, permitting customary add-backs and noncash items.
  • Allowing earlier stage businesses access to MSLP capital despite not having generated sufficient EBITDA but are otherwise unable to access the PPP because of the SBA affiliate aggregation rule. We cannot let these middle market businesses fall through the cracks.
  • Recognizing non-bank lenders, including BDCs electing Regulated Investment Company status under Internal Revenue Code Sec. 851(a)(1)(B), as eligible lenders under both the MSNLF and MSELF.
  • Expanding the definition of an eligible loan in both the MSNLF and MSELF to include loans made by entities electing Regulated Investment Company status under Internal Revenue Code Sec. 851(a)(1)(B).
  • Refraining from the automatic application of restrictions on dividends and stock repurchases stipulated under section 4003(c)(3)(A)(ii)(I) of the CARES Act, given the need for middle market businesses to attract and retain investors, and that both retail and institutional investors rely on the income generated from dividend payments.
  • Ensuring the terms related to dividend restrictions reflect the uniqueness of certain investment structures and pass-through entities which are required to make tax-related distributions to shareholders. BDCs should not be disqualified from programs or facilities providing direct loans as a result of compliance with other legal obligations.

Clarity on SBA Qualifications for PPP

Despite the CARES Act’s plain language that “any business concern” that is small qualifies for PPP, real estate businesses must consult a litany of documents to establish necessary clarifications for qualifications, including various Treasury Q&As on the issue, two interim final rules (IFRs) issued by the SBA on April 2 and April 14, at least three existing 7(a) program rules, and an SBA 7(a) operating manual. This, and other documents, all must be referenced in an attempt to answer the basic question of whether certain real estate businesses are covered by the PPP.

In a letter sent to the Treasury and SBA today, the IPA along with a coalition of real estate associations asked that the SBA issue guidance to remove the aforementioned uncertainty and confirm that developers and landlords qualify for PPP, where they meet “small business” size standards set forth in the Coronavirus Aid, Relief, and Economic Security (CARES) Act. As always, we encourage our members to reach out to their own contacts at the IRS, the Treasury, the SBA and other regulatory bodies to support these critical issues.

If you have any questions, please don’t hesitate to reach out to myself or Tony.


Anya Coverman
SVP, Government Affairs and General Counsel
Institute for Portfolio Alternatives