While the Main Street Lending Program (MSLP) is no longer active, this federally backed lending option gave business owners much to consider to safeguard their businesses against future challenges and to be more proactive in capital structuring. Here are the latest insights we’ve learned about MSLP, and how you can move your business forward with greater preparedness and confidence.
Gone, But Not Forgotten. What Was MSLP?
In 2020, the Federal Reserve launched the Main Street Lending Program (MSLP) to provide liquidity to small and mid-sized businesses navigating economic disruption. Administered through participating banks and backed by the Federal Reserve, the program was designed to support businesses that were too large for PPP but still required stabilization capital. (Federal Reserve Board – Main Street Lending Program: https://www.federalreserve.gov/monetarypolicy/mainstreetlending.htm)
The program has since ended. However, the structural lessons it revealed about EBITDA-based lending, capital structuring, loan covenants, refinancing risk, and ownership exposure remain highly relevant in today’s financing environment. Below are the top lessons learned about this program, so you can be better informed if similar circumstances unfold in the future.
What the MSLP Revealed About EBITDA-Based Lending
A defining feature of the Main Street Lending Program was its reliance on EBITDA multiples to determine loan size. Borrowing capacity was calculated using adjusted EBITDA, less existing outstanding debt.
This highlighted a critical reality: EBITDA can be both an accounting metric and a negotiation variable.
Underwriting decisions often turned on:
- One-time expense add-backs
- Legal settlements
- Owner compensation adjustments
- Pandemic-related non-recurring costs
- Recurring vs. non-recurring expense classification
Different banks interpreted adjustments differently. Some were conservative. Others allowed broader flexibility.
This remains true today across:
- SBA 7(a) loans (U.S. Small Business Administration – 7(a) Loan Program: https://www.sba.gov/funding-programs/loans/7a-loans)
- SBA 504 commercial real estate loans (https://www.sba.gov/funding-programs/loans/504-loans)
- Private credit facilities
- Middle-market commercial lending
- Leveraged finance transactions
Businesses that maintain well-documented, defensible EBITDA calculations are better positioned to negotiate favorable loan terms. Those without structured financial reporting often discover limitations at the most inopportune moments.
Personal Guarantees & Real Risk Exposure
While the MSLP did not universally require personal guarantees, many participating banks required them as part of standard underwriting practices.
This reinforced a key lesson: government-backed lending does not eliminate personal or structural risk.
Today, many financing arrangements (including SBA-backed loans and commercial term loans) frequently include:
- Personal guarantees
- Collateral pledges
- Restricted payment clauses
- Financial covenants tied to performance
The U.S. Small Business Administration outlines borrower and guarantor responsibilities in its lending guidelines (SBA Loan Requirements: https://www.sba.gov/funding-programs/loans).
Business owners must evaluate capital decisions holistically. Access to liquidity should always be assessed alongside exposure to personal liability and covenant restrictions.
Debt Stack Strategy & Refinancing Risk
Certain MSLP loan structures permitted refinancing of existing debt at origination. This required businesses to analyze total leverage and carefully structure their debt stack.
The program underscored several enduring capital management principles:
- Senior vs. junior debt positioning affects flexibility
- Cross-default provisions can limit maneuverability
- Refinancing timing influences long-term cost
- Debt layering without modeling can increase risk
In today’s higher-interest-rate environment, refinancing risk and maturity planning are even more critical. Businesses relying on structured financing must understand:
- Variable rate exposure
- Maturity triggers
- Covenant compliance thresholds
- Balloon payment risk
Compensation & Distribution Restrictions
The MSLP imposed temporary limitations on executive compensation and shareholder distributions. While specific to that program, the broader principle applies widely.
Most structured debt agreements today include:
- Restricted payments provisions
- Dividend limitations
- Compensation oversight triggers
- Cash sweep requirements
These behavioral constraints are common in SBA loans, commercial lending agreements, and private credit structures.
What Business Owners Should Prioritize in Uncertain Markets
Although the Main Street Lending Program has concluded, its structural lessons remain central to modern capital planning and financial risk management.
Today, business leaders should prioritize:
- Maintaining accurate, reconciled monthly financial statements
- Developing defensible EBITDA documentation
- Building rolling 12-month cash flow forecasts
- Conducting scenario modeling under revenue or interest rate stress
- Reviewing loan agreements annually for covenant and change-of-control clauses
- Evaluating personal guarantee exposure before accepting capital
- Preparing lender-ready financial packages before refinancing discussions
Comparable Capital Options in Today’s Financing Environment
While MSLP is a thing of the past, businesses may consider structured financing options such as:
- SBA 7(a) loans for working capital and general operations
- SBA 504 loans for commercial real estate and equipment financing
- Asset-based lending facilities
- Traditional commercial term loans
- Private credit solutions
- Revenue-based financing
- Strategic equity capital
Strategic Advisory Support for Capital Structuring
Modern capital strategy requires forward-looking financial leadership.
TGG Accounting provides outsourced accounting, financial consulting, and fractional CFO services designed to help businesses strengthen reporting systems, structure debt intelligently, and build resilience in evolving economic conditions.
Capital structuring in uncertain markets demands clarity, compliance, and discipline.
If your organization is evaluating financing options, restructuring debt, or preparing for growth initiatives, contact TGG Accounting. We can help you build a structured, risk-aware capital strategy.
This post was reviewed by our team of accounting and financial experts. TGG’s mission is to make business owners’ lives better through excellent financial management. We strive to provide the most up-to-date and objective information on accounting-related topics so our readers can make informed decisions based on factual content. All posts undergo a review process with at least one member of our Leadership Team to ensure accuracy.
This post contains trusted sources. All references are hyperlinked at the end of the article to take readers directly to the source.
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Matt Garrett is the Founder and Chief Executive Officer of TGG. He is a regular speaker across the country on behalf of Vistage educating business owners on the need for sound financial practices, and is Vice President of the Board of Directors of FINACA. Under Matt’s leadership, TGG has received the following recognition: INC. 5000 top companies in the U.S. five years in a row; one of “San Diego’s Fastest Growing Companies” the past four years; and is among San Diego’s “Best Places to Work.”