Update: As the creation of a new lending facility for nonprofits through the Main Street Lending Program (MSLP) is not a certainty at this point, ACE and a number of other higher education associations are calling for the expansion of existing loan programs to better serve colleges and universities.
The House-passed Health and Economic Recovery Omnibus Emergency Solutions (HEROES) Act—the fifth COVID-19 emergency spending bill—contains two provisions that the groups are requesting the Senate to support. See the following letters sent on May 29:
To the Senate Committee on Banking, Housing, and Urban Affairs: The first provision would require the Federal Reserve to expand the MSLP to nonprofits, including nonprofit private and public institutions of higher education, and affirm that institutions and university systems of all sizes are eligible to participate. The letter also asks that all student workers be exempt from any employee threshold used for eligibility for this or any future loan programs created to address the COVID-19 crisis.
To the Senate Committee on Small Business and Entrepreneurship: The second provision expands the Small Business Administration Paycheck Protection Program (PPP) to all nonprofits, regardless of size. The groups also urge the Senate to explicitly make all nonprofit and public institutions of higher education eligible for PPP, just as the HEROES Act did for the Main Street Lending Program.
**********
ACE, Other Associations Call for Creation of New Federal Lending Facility for Nonprofits
May 26, 2020
Asserting that access to affordable capital is a necessary lifeline as colleges and universities navigate the economic fallout from the COVID-19 crisis, ACE and 34 other associations are supporting the creation of a new lending facility for nonprofits through the Main Street Lending Program (MSLP) at the Federal Reserve.
In a May 22 letter to Jerome Powell, chair of the Board of Governors of the Federal Reserve System, and Treasury Secretary Steven Mnuchin, the associations said that while they appreciated the changes made so far to the Main Street Lending Program (MSLP), including increasing eligibility thresholds to 15,000 employees or $5 billion in annual revenue, nonprofits are still considered ineligible.
However, the letter notes, the Federal Reserve Board has recognized the “critical role that nonprofit organizations play through the economy" and appears to be evaluating a separate approach that involves setting up facilities that can provide direct lending to colleges, universities, and nonprofit medical institutions. Given the outsized economic impact that higher education institutions have on their states and local communities, and the extreme and continuing financial impact of the pandemic on colleges and universities, a new pipeline to capital is badly needed.
“Many of our colleges and universities are seeking low-cost, bridge loans to help address the financial impact of the COVID-19 crisis and are interested in accessing the credit and loans created by the CARES Act and made available through the Federal Reserve," the letter states. “Providing nonprofit colleges and universities access to low-interest loans will enable them to continue to serve as economic drivers in their local and state economies and employ millions of faculty and staff around the country."
In creating a new lending facility, it will be important to explicitly state in the eligibility criteria that both public and private nonprofit institutions, including colleges and universities, are eligible for the loans. The letter lays out other important considerations and asks that this new facility be extended to all nonprofit private and public institutions of higher education, regardless of the number of employees.
To read the letter, click here.