The Program Is Over. The Workout Is Not.
When we first wrote about the Main Street Lending Program, the issue was straightforward: borrowers were approaching a five-year maturity wall and needed to prepare. That phase has now passed. The program stopped purchasing loan participations in January 2021, and what remains is no longer a policy discussion. It is a shrinking, distressed loan book being resolved through workouts, collections, and asset sales. For borrowers still carrying these loans, the relevant framework today is not government support. It is creditor negotiation.
The data reflects that shift clearly. By the program’s close in early January 2021, MSLP had funded approximately 1,830 loans totaling $17.5 billion (federalreserve.gov). By April 2026, net portfolio holdings – which include both remaining loan participations and Treasury equity inside the SPV – had declined to approximately $1.4 billion as of April 29, 2026 (federalreserve.gov). The Federal Reserve Bank of Boston’s lending to the Main Street SPV was repaid in full in January 2026. Cumulative recognized losses now total approximately $2.05 billion (federalreserve.gov), more than the entire remaining loan book is worth. and the SPV has reserved a credit loss allowance against most of what remains, leaving the book value of loan participations net of allowance at approximately $178 million as of April 29, 2026 (federalreserve.gov). The average internal rating of remaining loans is equivalent to a Caa3 on the Moody’s scale, with 54% of the portfolio rated Ca, one notch above default (federalreserve.gov). What is left is expected to resolve commercially, not programmatically.
What the Program Can and Cannot Do
Borrowers need a clear view of what flexibility actually exists. Main Street loans are fullre course obligations and are not forgivable under the CARES Act. While the SPV may consider certain modifications, those tools are limited to adjustments around the structure
of the obligation, not its principal amount.
In practice, that means borrowers may see some flexibility around interest treatment, amortization timing, or maturity extensions. In certain cases, the SPV may permit new priming capital. These are useful tools in the right situation, but they do not address a fundamental mismatch between debt and enterprise value. A borrower that requires a reduction in principal to restore balance sheet sustainability will not find that solution inside the program while the SPV remains the holder. (bostonfed.org).
This is not abstract. Recognizable mid-market businesses have already filed for Chapter 11 with substantial Main Street debt outstanding – Starboard Group, a Wendy’s franchisee with $49.8 million (qsrmagazine.com); Coach USA, the national bus operator, with $37.9 million (edition.cnn.com); Corsa Coal, the Pennsylvania coal producer, with $16.3 million (coalage.com). Each tried to negotiate. Each ran out of road. The companies that resolved their situations successfully—through refinancing, asset sales, or strategic transactions—generally did so when they still had operating momentum and credit market access. Timing matters more than severity.
Personal Guarantees Need to Be Understood Precisely
Personal guarantees are often the single most important economic variable in a Main Street loan, and they are frequently misunderstood. The program did not require them, but where they exist, they typically apply to the entire loan, not just the bank’s retained position. That means the exposure follows the credit. A sale of the loan does not eliminate the guarantee. (bostonfed.org)
The starting point is simple. A guarantee is a contract. It survives a transfer unless the documents say otherwise. Borrowers who assume that a new buyer weakens the guarantee are usually wrong on the law. Where they may be right is on the economics.
That distinction matters. Guarantees are enforced, not assumed. A creditor still has to pursue recovery, and that introduces time, cost, and uncertainty. If the guarantor’s assets are illiquid, hard to access, or subject to competing claims, the practical value of the guarantee may be materially lower than its face amount. Sophisticated buyers underwrite that reality. They do not pay for theoretical recoveries.
That is where leverage can emerge. A buyer who acquires the loan at a discount is making a return decision. If a negotiated outcome that includes a release of the guarantee produces an acceptable recovery relative to its purchase price, that buyer will engage. In that context, the guarantee becomes a tool in the negotiation, not the end of it.
None of this is automatic. The documents control. Some guarantees are broad and durable. Others include limitations, conditions, or structural weaknesses. There may be issues around consent, modification of the underlying obligation, notice requirements, or assignment mechanics. These are legal questions, and they need to be analyzed precisely. But borrowers should not build a strategy around finding a technical defect. Most guarantees are enforceable enough to matter.
Timing is critical. Before a loan is sold, there is an opportunity to shape the outcome, including, in some cases, influencing who ends up holding the paper. After the sale, the borrower is negotiating with a motivated investor who has already defined its return profile. At that point, the conversation becomes narrower and more transactional.
The takeaway is direct. A personal guarantee is not something you can wish away, but it is not always as absolute as it looks. Its real value is determined by enforceability and economics, not headline exposure. Borrowers who understand that distinction and engage early tend to have more room to negotiate both the debt and the guarantee as part of a single solution.
The Auction Will Reset the Dynamic
The Boston Fed has stated its intention to sell the remaining participation interests held by the Main Street SPV through a competitive auction process. That development changes the dynamic for borrowers. (bostonfed.org)
While the SPV holds the participation, borrowers are effectively dealing with a governmentadministered counterparty operating within statutory constraints. Once the participation is sold, that counterparty may be replaced by a private investor that acquired the loan at a discount and is focused on recovery.
This shift can introduce both opportunity and risk. A private holder may have more flexibility to negotiate a restructuring. At the same time, that holder will be economically motivated and may pursue outcomes more aggressively. Borrowers should not assume
they will control who acquires their loan or how that party approaches the situation.
There is also a structural nuance worth understanding, well-articulated in recent analysis by Hunton Andrews Kurth. A sale of the SPV’s participation does not necessarily change the borrower’s day-to-day experience. In most cases, the originating bank remains the lender of record and continues to service the loan, hold legal title, and collect payments. What changes is who sits behind the bank. The buyer of the participation steps into the SPV’s position for major decisions, including amendments, waivers, enforcement, and workout strategy. The mechanics of the relationship may look unchanged, but the decision-maker has shifted. Borrowers who assume that no transition has occurred because the same bank is still calling are missing the point. (hunton.com)
The identity of that new decision-maker also matters. The SPV is a governmentadministered entity bound by statutory constraints and a commercial-only mandate. A private buyer is not. It may be a credit fund, a special situations investor, or a vehicle that is not a regulated institution at all. That party will operate under its own return expectations and timeline, not the standards a bank or government counterparty would apply. The shift can produce flexibility, but it can also produce a counterparty that moves faster, demands more, and engages on terms a borrower has not previously had to navigate
Can Borrowers Influence or Purchase Their Own Loan?
The announced auction process raises a practical question that most borrowers are now asking: can you control who buys your loan, or even purchase it yourself?
The short answer is yes in concept, but not directly and not without constraints.
The Main Street SPV is selling participation interests through a competitive process. Borrowers are not the seller, and they are not the counterparty to that transaction. That means a borrower cannot simply “buy back” its loan at a discount in its own name. In most cases, loan documents restrict borrower repurchases, and even where they do not, the process itself is designed to maximize recovery through competitive bidding, not facilitate discounted takeouts by the borrower.
That said, individual loans can and do get purchased. These are not necessarily pooled assets. Sophisticated buyers often underwrite loans on a position-by-position basis, particularly where there is a clear path to recovery or a definable collateral package. In practice, that means a borrower’s loan can end up in the hands of a single buyer or a small group of investors focused on that specific credit.
Where borrowers do have influence is indirect, but meaningful if handled correctly.
First, borrowers can identify and engage potential buyers ahead of the auction. That may include credit funds, special situations investors, or even existing stakeholders who understand the business. If a credible buyer has already completed diligence, aligned on value, and is prepared to act, that buyer is in a stronger position in a competitive process. Borrowers cannot dictate the outcome, but they can improve the odds that a rational counterparty ends up owning the paper.
Second, borrowers can help shape the narrative around the credit. Buyers are underwriting recovery. A borrower that presents a clear, credible plan, supported by data, collateral analysis, and a realistic path to resolution, is easier to underwrite than one that does not. That can impact pricing and, in some cases, who is willing to engage.
Third, borrowers can participate economically, but typically through a structure, not directly. This may involve a sponsor, affiliate, or third-party vehicle acquiring the loan, subject to legal and disclosure constraints. These structures need to be handled carefully. They raise issues around lender consent, insider status, and equitable treatment of creditors. Done properly, they can be effective. Done poorly, they can create legal exposure and undermine the process.
The takeaway is straightforward. You may not control the auction, but you can influence the outcome. The window to do that is before the loan is sold, not after.
Why the Bank Feels Unhelpful
Many borrowers look to their bank for solutions and are frustrated by the lack of progress. The structure explains much of this.
In most cases, the originating bank retained a small portion of the loan and sold the majority participation to the SPV. The bank remains the point of contact, but it does not control the economics of the position. It can facilitate communication and, in some cases, advocate for a resolution. It cannot independently approve the outcomes borrowers are often seeking.
This does not make the bank irrelevant. A bank that wants to exit a small, troubled exposure may be aligned with a borrower seeking resolution. But that alignment only matters if the borrower presents a credible, well-supported proposal that the bank can take
forward.
What Problem Are You Actually Solving?
One of the most common issues in these situations is a failure to diagnose the problem correctly. A liquidity issue, a leverage issue, and an operating issue can present similarly. They are not the same.
A liquidity issue can often be addressed with incremental capital or asset-based solutions. A leverage issue requires balance sheet intervention. An operating issue requires changes to the business itself. Attempting to solve one problem with the tools of another typically results in delay and deterioration.
Borrowers who move early and define the problem clearly tend to preserve options. Those who do not often find that the range of solutions narrows quickly.
What Borrowers Should Be Doing Now
At this stage, execution matters more than analysis. Borrowers need accurate financial visibility, including a credible short-term cash flow forecast and a realistic view of what the business can support under current market conditions.
They should be mapping all available options, including refinancing, new capital, asset sales, note sale strategies, and potential strategic transactions. Each option carries different timing, cost, and execution risk. Those differences matter. They should also understand their downside before they are forced into it. That includes the implications of a loan sale, the role of any personal guarantee, and the potential outcomes in a formal restructuring process. Companies that understand their downside tend to negotiate from a stronger position.
Washington Is Not Coming
There is no evidence that Congress or the Federal Reserve intends to revisit the core terms of the Main Street Lending Program. The program has ended, FRBB’s capital has been repaid, and the remaining assets are being prepared for disposition.
Borrowers should plan accordingly. The resolution of these loans will be driven by commercial outcomes, not policy intervention.
How Harney Can Help
For companies dealing with remaining Main Street obligations, the issue is not identifying options. It is determining which ones are real and executing them in time.
Harney Capital and our affiliate, Harney Partners, work with companies to evaluate those options, develop a credible path forward, and engage effectively with lenders and counterparties when the margin for error is narrow.
