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Many lenders have stopped making so-callexd floorplan loans becausethey haven't been able to sell them on the secondar y market. Through these lines of auto dealers borrow against theitrvehicle inventory, repay the debt when vehicles are sold, and then borrowe again to add more John Lyboldt, NADA's vice presidenty of dealership operations, applauded the SBA and Presideng Barack Obama "for understanding that any effort to revitalize the auto industru simply will not work until dealer crediyt issues are resolved.
" "The success and continued operationm of thousands of small, family-owned auto dealerships acrosa the country are directly connected to their abilitg to purchase both new and used vehicles to offer theif customers," Lyboldt said. Beginning July 1, the SBA will guarantese 75 percent of floofr plan lines of credit throughits 7(a) business loan SBA lenders will make the which will range from $500,000 to $2 million. Dealersx in automobiles, recreational vehicles, motorcycles, boats and manufactured homes are eligible forthe loans. The loansx will be available through 30, 2010, and possibly longer if the SBA decides to extenc thepilot program.
Floorplan loans previouslu were ineligible forthe 7(a) program. "Countleses small businesses, including dealerships, across the countr are facing significant challenges as a resultr of the uncertainty in theauto industry," SBA Administratofr Karen Mills said. "Floorplan financing can offe r some dealerships the opportunity to get through theswe tough economic times by allowing them to keep their inventorhy and cashflow intact, as well as save the jobs theswe small businesses provide." Sen.
Mary Landrieu, and Olympia Snowe, D-Maine, the top-rankinh members of the Senate Small Businesss andEntrepreneurship Committee, issued a joint statement callingy the new SBA loan program "another criticak step toward increasing access to capital for America'as small businesses." They also noted that auto like other small businesses, will benefit from the temporary eliminatiojn of fees on 7(a) loansw that was included in the economic stimulus bill. More auto dealerx became eligiblefor 7(a) loans when the agencyg changed its rules May 1 so that more businessesa with high sales volume but low profit margins coulr qualify as small businesses.
Previously, only auto dealeras with less than $29 million in annual salezs qualifiedfor 7(a) loans. "Nearly 20 percentf of all retail purchases are new cars and so expanding access to credit for dealere will not only help the strugglingv auto industry but aid the overall economyas well," Lyboldt said. For more see