We have received several questions about the connections between Main Street, PPP, and EIDL loans. Let me try and explain. You can apply for a Main Street Loan if you have received a PPP and EIDL loans and meet other eligibility requirements. However, some implications are essential to understand.
Remember that when you apply for a Main Street Loan, you can ask for 4 or 6 times your 2019 EBITDA, minus your existing debt. Even though a significant percentage of your PPP loan will likely be forgiven, the total loan amount counts in your overall debt calculation and will reduce your Main Street Loan size.
When you apply for forgiveness to your bank, the process can take up to five months, and there will not be time to get forgiveness before the September 30th Main Street deadline. The good news about PPP loans is that since the bank does not file a lien against your business with the PPP loan, they do not impact the various Main Street facilities' legal requirements.
EIDL loans are a little trickier. Remember that when you accept an EIDL loan, the government files a blanket lien against your company. This legality will make it much trickier to work with a Main Street loan, as there is no indication that the SBA will cooperate with the necessary change in rights for EIDL loans to work in tandem with the program.
It is safe to assume that if you received an EIDL and want a Main Street Loan, you will have to apply for a Main Street Preferred facility and refinance the EIDL. You will be trading 30-year money for five-year money in these instances, but it might be worth it if your Main Street loan is significantly larger than your EIDL.