SBA Brings Back Auto Financing Pilot
A SBA pilot loan program aimed at increasing access to inventory financing for auto, boat, RV and other dealerships will re-launch Feb. 8.
The Small Business Jobs Act of 2010 included a provision for re-launching the SBA's Dealer Floor Plan Pilot Loan program, which first became available in July 2009, according to the SBA. The pilot is part of the SBA's overall 7(a) loan guarantee program. The Jobs Act also increased the maximum size for 7(a) loans to $5 million, up from $2 million, which includes loans made through the DFP pilot program.
Floor plan financing is a revolving line of credit that allows a dealership to obtain financing through SBA's 7(a) program for inventory that can be titled, such as autos, RVs, manufactured homes, boats and trailers. As each piece of collateral is sold by the dealer, the loan advance against that piece of collateral is repaid. As the loan is repaid, the dealer can borrow against the line of credit to add new inventory.
The program is available to qualifying small businesses, including new and used automobile, motorcycle, RV, manufactured homes and boat dealers. The SBA said it has issued a new maximum alternative size standard to allow businesses with $15 million net worth and $5 million in net income measured over two years to have access to the program.
All SBA-approved lenders may make DFP loans, according to the agency. Lenders with more than $1 billion of floor plan lines of credit in their current portfolios may apply for delegated authority, which would expedite the lending process.
"As a result of the credit crunch in late 2008 and early 2009, dealerships saw a significant decline in the availability of this type of inventory financing," said SBA Deputy Administrator Marie Johns.
The rules and regulations for the pilot will be available Feb. 8 on the website of The Federal Register, and in print editions Feb. 9. A procedural guide to the program will be posted on the SBA website at: http://www.sba.gov/content/dealer-floor-plan-financing-program-0.