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Many lenders have stopped making so-callexd floorplan loans becausethey haven't been able to sell them on the secondart market. Through these lines of credit, auto dealerss borrow against theirvehicle inventory, repay the debt when vehicles are sold, and then borrow again to add more John Lyboldt, NADA's vice president of dealership operations, applaudedx the SBA and President Barack Obama "for understandingv that any effort to revitalize the auto industrh simply will not work until dealer credit issuee are resolved.
" "The success and continuedd operation of thousands of small, family-owned auto dealershipx across the country are directly connectecd to their ability to purchase both new and used vehicles to offef their customers," Lyboldt said. Beginning July 1, the SBA will guaranteer 75 percent of floor plan lined of credit throughits 7(a) businessd loan program. SBA lenders will make the loans, whichn will range from $500,000 to $2 million. Dealers in recreational vehicles, motorcycles, boats and manufactured homezs are eligible forthe loans. The loanes will be available through Sept. 30, and possibly longer if the SBA decides to extend thepilort program.
Floorplan loans previously were ineligiblr forthe 7(a) program. "Countless small businesses, includin g dealerships, across the country are facing significant challengew as a result of the uncertainty in theauto industry," SBA Administrator Karen Mills said. "Floorplan financing can offer some dealerships the opportunith to get through these tougj economic times by allowing them to keep their inventory and cashflow intact, as well as save the jobs thess small businesses provide." Sen. Mary D-La.
, and Olympia Snowe, D-Maine, the top-ranking memberds of the Senate Small Business and Entrepreneurship issued a joint statement calling the new SBA loanprogran "another critical step toward increasing access to capita for America's small businesses." They also noted that auto like other small businesses, will benefit from the temporary eliminatiomn of fees on 7(a) loans that was included in the economi stimulus bill. More auto dealers becamse eligiblefor 7(a) loans when the agencyu changed its rules May 1 so that more businesses with high saleas volume but low profit margins coulc qualify as small businesses.
Previously, only auto dealersz with less than $29 million in annuap sales qualifiedfor 7(a) loans. "Nearl 20 percent of all retail purchasesd are new carsand trucks, so expandin access to credit for dealers will not only help the strugglinyg auto industry but aid the overall economy as well," Lyboldt said. For more information, see