The Main Street Lending Program (MSLP), launched in 2020 as part of the federal response to the COVID-19 pandemic, provided billions in liquidity to small and medium-sized businesses facing unprecedented economic disruption. The Federal Reserve Bank of Boston (FRBB), acting as the program’s administrator through a newly created special purpose entity, purchased a 95% participation interest in all eligible loans, with originating banks retaining the remaining 5% interest and servicing responsibilities. Loans issued under the MSLP ranged from a few hundred thousand dollars up to $50 million. Each loan had a five-year term with a 70% balloon payment due at maturity. The MSLP closed to new lending in January 2021.[1]

While some borrowers have secured short term extensions of several months up to one year in limited circumstances,[2] most outstanding loans will face maturity deadlines between now and early January 2026. As of October 31, 2025, approximately $1,086,818,968 in MSLP loan principal remained outstanding.[3] Many borrowers with outstanding MSLP loans may be unable to refinance the loans or pay them off at maturity. With the MSLP program scheduled to wind-down in the coming months, a critical question looms: what will happen to the nearly one thousand MSLP loans that may default as a result of maturity? 

There Are Potential Options, but Uncertainty Remains 

Principal Forgiveness. The federal statute governing MSLP provides that “[t]he principal amount of any obligation issued by an eligible business … under [the Main Street Program] shall not be reduced through loan forgiveness.”[4] This language makes clear that it is unlikely the FRBB will forgive any of the MSLP loans that mature in the next few months absent an act of Congress or the Executive branch that alters a fundamental tenet of the program.  

Term Extensions. Under certain circumstances, the banks administering MSLP loans and the FRBB have granted borrowers short term extensions of the maturity date. Typically, these extensions have not exceeded six months. Even with extensions, these MSLP loans likely will mature within the next few months. As of now, the FRBB has indicated that further or longer-term extensions may not be available.

Individual Loan Sales. For MSLP loans that have defaulted prior to their maturity date, the FRBB has approved sales of these loans to the administering banks or third parties that express an interest in purchasing the defaulted loans if certain criteria are established. More detail about this process can be found here. Given the length of time required and administrative burden on the FRBB in approving individual loans sales, it seems unlikely that the FRBB could dispose of all of the remaining MSLP loans in this fashion before the program’s scheduled termination.   

A Sale of the MSLP Loan Portfolio. As an alternative option, the FRBB could pool and sell one or more packages of outstanding MSLP loans. In fact, the standard terms and conditions of the participation agreement that governs each MSLP loan provides such a mechanism. As a condition to the FRBB purchasing a 95% interest in each MSLP loan, the administering bank executed an “assignment in blank,” providing advance consent to the transfer of the bank’s 5% interest in the loan to the FRBB in certain circumstances.[5] For example, in the event of a payment default by a MSLP borrower, including as a result of the scheduled maturity of the loan, the FRBB may “elevate” its participation interest by activating the assignment of an administering bank’s 5% interest in the loan pursuant to the Assignment Executed in Blank without any further consent by the administering bank.[6] In exchange, the FRBB is required to pay an “Elevation Transfer Fee.”[7] Upon the upcoming maturity of the majority of the outstanding MSLP loans, the FRBB could elect to exercise its “elevation” right in respect of a large pool of loans, or several smaller pools of loans, thereby taking full ownership of the loans to facilitate a portfolio sale without the administrative burden of seeking bank consent.

Another option is for the FRBB to sell only its participation interest and rights under the participation agreement, thereby leaving each bank administering MSLP loans with its 5% economic interest. Similar to an Elevation, the FRBB does not need the consent of the administering banks to sell its participation interests for loans that are in payment default.[8] It is unclear whether there would be buyers interested in purchasing the FRBB’s participation interests. Any such buyers would step into the shoes of the FRBB for purposes of the servicing arrangement with each administering bank. 

Liquidation. The MSLP was designed as a stimulus program aimed at providing much needed liquidity to businesses impacted by the COVID-19 pandemic. Although the loans are recourse, and not forgivable unlike other pandemic stimulus programs, forcing businesses with MSLP loans to liquidate might be viewed as anathema to the program’s intent. By selling the loans into the private market at their market value, as discussed above, the FRBB could give struggling business the opportunity to restructure the MSLP loans rather the face liquidation. It could further allow the administering banks to recover all or a substantial percentage of their economic interest in the loans and remove themselves from the loan workout process. 

Considerations for Borrowers. The MSLP contains a statutory prohibition on principal forgiveness. The statute’s plain language suggests the restriction is tied to the FRBB’s ownership,[9] although regulatory guidance is sparse. In the event a borrower’s MSLP loan is sold—whether as a single loan or as part of a pool of loans—borrowers should anticipate the opportunity to negotiate for new loan terms, including a potential reduction in principal amount if the circumstances warrant. If the FRBB exercises its right to elevate its participation interests and sell one or more loan pools, thereby replacing the current structure of a disparate group of banks that administer the MSLP loans with a single counterparty, borrowers might expect more consistency and predictability in pursuing workout negotiations. That said, some borrowers may have concerns with facing a new lender with which they have no prior relationship or business dealings. Many borrowers had pre-existing relationships with the banks that administer their MSLP loans. In that instance, borrowers that have misgivings about facing a new and unknown lender may decide to accelerate workout discussions with the banks currently administering the MSLP loans.

Considerations for Lenders. In the event the FRBB decides to elevate any MSLP loans or sell participation interests, the administering banks should understand their rights under the applicable documents. The form participation agreements provide for lenders to receive notice and to provide consent unless the transaction fits within the one of the specified exceptions, such as in the event the loan is in payment default.[10] If an MSLP loan is in default, the FRBB is free to sell, assign, or transfer its interests in MSLP loans without the banks consent, provided that (i) the transaction does not result in a violation of any terms of any loan documents, (ii) the transferee makes certain representations, warranties, and covenants already existing under the standard participation agreement, and (iii) the transferee (A) either (1) is organized under the laws of the United States or any state thereof or (2) has represented that no taxes will required to be withheld from the FRBB on account of any payments made to the transferee on account of the transferred interests, and (B) furnishes to the FRBB documents evidencing the transferees exemption from withholding of any tax imposed by any jurisdiction or to enable FRBB to comply with the laws relating thereto.[11] In the event the FRBB sells its participation interests in the MSLP loans to a non-government third-party, the transition away from federal oversight may inject uncertainty into the process, particularly the handling of distressed assets. Originating banks accustomed to the FRBB’s standardized directives may find communication and decision-making more challenging with one or more new participants. Divergent interests and strategies could complicate modifications, workout negotiations, and servicing logistics.

Looking Ahead 

As the MSLP nears its final chapter, the outcome for business with outstanding MSLP loans remains uncertain. The FRBB has several options for winding down the program but has yet to give any indication about what course of action it will take. The possibility of a bulk portfolio sale by the FRBB raises certain practical and legal questions for both borrowers and lenders and could pave the way for potential loan workouts and restructurings. Key issues will hinge on the interplay of contractual consent rights, statutory restrictions, and the appetite of new investors to engage in creative workouts. In the months ahead, market participants should closely monitor regulatory signals and prepare for a potentially more fluid—and uncertain—environment for MSLP loans.

[1] A more detailed description of the background and mechanics of the MSLP can be found in previous Hunton articles on the topic at: COVID-19 Hangover: Lender Options for a Distressed Main Street Lending Program Loan & Running Out of Road: Workout Options for Main Street Lending Program Loans Nearing Maturity.

[2] See Financial Statements: MS Facilities LLC For the Years ended December 31, 2024 and 2023 and Independent Auditors’ Report, p. 19 n. 1-3.

[3] See Periodic Report: Update on Outstanding Lending Facilities Authorized by the Board under Section 13(3) of the Federal Reserve Act November 10, 2025. At the close of the third quarter of 2024 (last reported data), approximately 847 MSLP loans remained outstanding. See GAO-25-107246, Federal Reserve Lending Programs: Nearly Half of Main Street Program Loans are Fully Repaid, but Losses have Increased, (Dec. 19, 2024).

[4] 15 U.S.C. § 9042(d)(3).

[5] See Participation Agreement Under the Main Street Lending Program: Standard Terms and Conditions, § 3.1.

[6] See id. at §§ 1.2, 15.1

[7] See id. at §§ 1.2, 15.4

[8] See id. at § 10.1(a)

[9] See 15 U.S.C. § 9042(d)(3) (“(d) Financial protection of government (3) The principal amount of any obligation issued by an eligible business, State, or municipality under a program described in subsection (b) shall not be reduced through loan forgiveness.” (emphasis added).

[10] See Participation Agreement Under the Main Street Lending Program: Standard Terms and Conditions, § 10.1.

[11] Id.