WASHINGTON – United States Senate Committee on Small Business and Entrepreneurship Chair Mary Landrieu, D-La., and Ranking Member Olympia J. Snowe, R-Maine, today commented on the Small Business Administration’s (SBA) announcement that the agency will waive its floor plan lending prohibition that is currently part of the 7(a) loan guarantee program. The policy change will allow the SBA to guarantee up to 75% of floor plan loans to dealerships to purchase cars, recreational vehicles, manufactured homes, motorcycles and boats.
“The SBA’s plan to offer floor plan loans to America’s dealerships will help small businesses stay open in this uncertain economy,” Sens. Landrieu and Snowe said. “These loans will enable dealerships to maintain their inventory and save jobs. The provisions that the Small Business and Entrepreneurship Committee secured in the Recovery Act will also make floor plan financing more affordable by eliminating borrower fees on the loans. This is another critical step toward increasing access to capital for America’s small businesses.”
Floor plan financing is a line of credit that allows dealers to borrow against their inventory, and then repay that debt as they sell their inventory or borrow against the line of credit again to add new inventory.
Under the new program, the SBA will provide loan guarantees for lines of credit through its 7(a) program. These loans will be made through SBA lenders only for titled inventory, including autos, RVs, manufactured homes, boats and motorcycles. The pilot program will begin July 1 and will be available through Sept. 30, 2010, at which time the SBA will make the determination of whether or not to extend the program.
Floor plan loans will be available for a minimum of $500,000 up to the $2 million allowable under the 7(a) program. With a maximum repayment term of five years, the loans will come with a 75 percent government guarantee.
The SBA’s announcement follows another recent announcement that the agency will temporarily streamline its 7(a) size standards to offer car and RV dealers, among others, access to SBA-backed loans. Both actions follow an April 8th letter that Chair Landrieu and Ranking Member Snowe co-authored along with Committee members John Thune, R-S.D., Jeanne Shaheen, D-N.H., and others urging President Obama and the SBA to take both of these steps.