Main Street Lending Program Loans Are Coming Due
Businesses in South Florida received many different forms of funding during the COVID-19 pandemic, from funding that functioned like grants and did not need to be repaid to various types of loans. Many of those loans are now coming due, including loans received through the Main Street Lending Program (MSLP). The MSLP provided five-year loans to small businesses on the larger side, as well as mid-size businesses. These loans were issued to businesses in South Florida and throughout the country that might otherwise have been ineligible, due to their size, to receive loans that could ultimately be forgiven through the Paycheck Protection Program. According to information from Financial Advisor, a total of 1,830 adjustable rate loans were made through the MSLP, and those loan amounts range from $100,000 up to $300 million, totaling $17.5 billion. By late 2024, a large percentage of MSLP loans had been repaid, but loans totaling $1.23 billion were in default.
Like other kinds of loans to businesses, initial payments were deferred. In late 2025, however, a balloon payment will become due. If your business is considering a Chapter 11 bankruptcy filing, this type of bankruptcy could allow you to restructure your debt, including the massive balloon payment that your business may soon owe.
Understanding the Main Street Lending Program Balloon Payment
The MSLP was funded through the CARES Act in 2020 and was an option for businesses with up to 15,000 employees and up to $5 billion in revenue. The loans were established with a five year maturity, with principal payments could be deferred for two years, and interest payments could be deferred for one year. Most of the loans will mature in the fourth quarter of 2025, which means that a substantial balloon payment will come due for borrowers.
The balloon payments will likely be anywhere from 70 percent to 85 percent of the total amount due, and due in a lump sum payment. For most businesses that borrowed through the MSLP, there is no way for the business to repay the balloon payment amount that will become due. For those businesses, Chapter 11 bankruptcy could be a solution.
How Chapter 11 Bankruptcy Can Allow You to Restructure Debt and Avoid the Balloon Payment
Chapter 11 bankruptcy is a type of reorganization bankruptcy. As such, it allows businesses to restructure debts — including debts with balloon payments — to repay debt owed over a period of time. Through the Chapter 11 repayment plan, a business can get back on track financially and remain financially sound in the future.
If your business will soon owe a balloon payment on an MSLP loan, you should find out more about Chapter 11 bankruptcy and its applicability to your business.
Contact Our West Palm Beach Bankruptcy Attorneys Today
If your business will soon owe a substantial balloon payment associated with a loan from the Main Street Lending Program, restructuring your debt through a Chapter 11 bankruptcy filing could allow you to continue operating your business while restructuring your debt. An experienced West Palm Beach bankruptcy lawyer at Kelley, Kaplan & Eller can answer any questions you have, and we can provide you with more information about Chapter 11 bankruptcy. Contact us today to discuss your business’s financial circumstances and options for loan repayment.
Sources:
federalreserve.gov/monetarypolicy/mainstreetlending.htm
fa-mag.com/news/fed-s-pandemic-program-to-help-main-street-is-now-a-burden-for-businesses-80427.html
