BY MARILYN ODENDAHL, Truth Staff
modendahl@etruth.com
The Small Business Administration unveiled a new inventory lending program Thursday to help dealerships get the financing they have desperately needed to purchase new units.
Set to start July 1, the pilot program will offer government-guaranteed floorplan loans for auto, recreational vehicle, boat, manufactured housing and motorcycle dealers. Although some doubt the program will do much to ease the tight credit environment, many view the government's effort as a morale boost to those struggling industries.
"It's nice to know that your elected officials are really trying to help you," said John Stump, general manager and chief executive officer of Main Channel Marine in Syracuse. "Sounds like they got something good here -- that's a positive move."
Thursday afternoon, U.S. Sen. Evan Bayh, D-Ind., and U.S. Rep. Joe Donnelly, D-2nd, joined Karen Mills, SBA administrator and Ed Montgomery, director of Recovery for Auto Communities and Workers, in announcing the availability of federally backed floorplan loans.
Under the Dealer Floor Plan pilot program, which runs from July 1, 2009, through Sept. 30, 2010, inventory financing will be available to eligible dealers for a minimum of $500,000, up to $2 million. The loans will carry a 75 percent government guarantee and come with a maximum repayment term of five years.
Donnelly said the program will provide another avenue for dealers to get floorplan loans along with the traditional sources of GE Capital and some banks.
The goal is to enable in particular the RV, boat and manufactured housing industries to move away from depending on just one company for financing.
"The SBA guarantees the loans so the banks will want to participate," Donnelly said. "We think once banks understand what good loans these are, they will want to participate."
Lake City Bank already provides wholesale financing to area dealerships and David Findlay, executive vice president of administration and chief financial officer, questioned the idea that lenders currently not offering floorplan loans will start doing so because of the SBA program.
"We're not going to lend a million dollars because we now have a guarantee of 75 percent," Findlay said, noting his bank cannot afford to potentially lose 25 cents on every dollar. "Every bit helps but I don't see this as being a substantial inducement to expand lending."
The Recreation Vehicle Industry Association and the National Marine Manufacturers Association hailed the new financing program. The inventory lending will impact more than dealers, explained Cindy Squires, chief counsel for public affairs and director of regulatory affairs at NMMA.
Giving dealers the ability to fill their lots with units will create demand for U.S.-based manufacturers and suppliers to build more products.
Squires said that just having the government step into the market may give some dealers confidence to keep their businesses open during these tough times.
In developing this program, the SBA originally focused on the auto industry. But conversations with the Indiana delegation, among others, convinced the agency to include RV, boat and manufactured housing dealers.
Along with Bayh and Donnelly, U.S. Sen. Richard Lugar, R-Ind., and U.S. Rep. Mark Souder, R-3rd, were singled out for praise by the RVIA and NMMA.
SBA loans usually come with additional paperwork and requirements for lenders and borrowers.
While Squires maintained having to "fill out a few more forms" does not detract from the impact of the new lending program, Stump had reason to pause.
"Any SBA loans that they're going to do that targets the RV and marine dealers would be an advantage as long as there aren't too many strings attached to it," Stump said. "If it's a legitimate help for business, I think a lot of businesses will take advantage of it."