The Small Business Administration (SBA) began accepting loan applications today (July 1) from RV dealerships for guaranteed floorplan loans under a new 15-month pilot program.
SBA officials, however, declined to predict when the money will start flowing.
”We expect there will be a ramp up period as we roll out the program,” said Eric Zarnikow, SBA associate administrator for capital access, during a telephone press conference. ”It’s difficult to know when the first loan will be made.”
SBA ”guidance” to lenders became available on Tuesday, he said, and he encouraged dealers to contact local lenders who likely already are qualified to make SBA loans and are familiar with SBA procedures.
”In recent months, we’ve seen a dramatic decrease in the availability of credit for financing dealership inventories,” SBA Administrator Karen G. Mills said in a press release. ”We want to be a partner for these small businesses and help ensure they have the resources they need to help keep their businesses open, save jobs and survive these tough economic times.”
The new program allows RV, automotive and watercraft dealers to establish revolving lines of credit ranging from $500,000 to $2 million, with SBA guaranteeing 60-75% of the loan, depending on collateral. Loans are to be repaid within five years.
The floorplan loans are available under the SBA’s 7(a) program, which typically guarantees 90% of the amount. SBA decided on the lower percentage because of the newness of the program.
”Given that this is a pilot program, there is some question about how these loans will perform,” Zarnikow said. ”We concluded that a 75% guarantee would provide encouragement to lenders without taking undue risk.”
Because it is a pilot program that expires Sept. 30, 2010, there is a 4,000-loan limit this year and next “We don’t expect to see that volume, particularly in 2009,” Zarnikow said.
The SBA will decide next year whether to extend the pilot program beyond its expiration date.