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RVDA Proposes Changes to SBA Floorplan Program

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August 5, 2009 by   Leave a Comment

The National RV Dealers Association (RVDA) requested several changes to the Small Business Administration’s (SBA) Dealer Floorplan (DFP) loan program designed to get SBA inventory financing loans to eligible dealers.

In comments filed with the agency today (Aug. 5), RVDA said that while the association “appreciates SBA’s recognition that RV dealers are struggling with wholesale dealer floor plan credit . . . RVDA requests that SBA consider revising its DFP rules and regulations to encourage more lenders to enter dealer floor plan financing.”

RVDA revealed its request in a new release issued this morning.

The DFP is a pilot program that began July 1 and is scheduled to expire in September  2010.  DFP loans are available for a minimum of $500,000 up to $2 million and used to finance the purchase of floorstock for auto, RV and boat dealers.

 “Despite the best intent of the SBA, RVDA and its dealers are finding that the details in the proposed regulations of the program are failing to encourage new lenders to enter into dealer inventory lending,” RVDA told the SBA.

Based on comments from dealers and RV finance professionals, in the press release RVDA made several recommendations it said are designed to make the program effective, including: 

  • SBA Must Loosen Restrictions on Eligible Lenders. SBA’s DFP initiative unreasonably limits potential lenders under its “eligible lender” criteria, which require many potential new floor plan lenders to have an established business relationship with the dealer.  “The agency needs to begin by redefining eligible lenders to allow a significantly greater percent of the banks to participate.  If the SBA can remove/diminish this hurdle, then the dealers and the industry can move forward with increased efforts to sell the benefits of dealer financing to the lending community,” RVDAtold the SBA.
  • Maximum Advance for RV Inventory Loans Should be Modified. The SBA set up a two-tier system for advance rates and guarantees by the agency.  New automobiles gain the benefit of 90% advance rates with a 75% SBA Guarantee.  However, the SBA classifies RVs along with used cars, and allows only an 80% advance with the 75% SBA guarantee.  “RVDA does not find the SBA’s difference in advance rates justified.  Lenders have always structured floorplan loans on motor vehicle inventory with the knowledge that it is a depreciating asset.  Unlike the housing industry, the motor vehicle industry has always used common sense in its loans to protect against downside losses.  We do not see a greater risk in RV inventory losses than there is with automobile inventory,” RVDA said.
  • SBA Should Identify and Publish Participating Lenders. SBA could assist dealers and the RV industry by identifying lenders that are interested in making DFP loans. “A list of SBA lenders participating in the DFP program is vital to the credibility of the program and SBA,” RVDA said.

In the comments, RVDA also offered its assistance to SBA and the lending community to help make the DFP program a success.

 “RVDA is extremely supportive of the SBA DFP program and recognizes its potential, to help our small business members.  However, some structural barriers are apparent and need revision in order to stimulate lending activity.  RVDA stands ready to help educate financial institutions on the benefits of lending to the RV industry,” RVDA told the agency.

At the upcoming RV Dealers International Convention/Expo, SBA representative Ed Brown and RV finance consultant Bill Thompson of Cardinal Points Network LLC, will conduct a workshop on SBA Dealer Flooplan Financing on Oct. 7.  RVDA also has complete information on the SBA DFP program, including links to SBA regional offices, in the RV Lender’s Tool Box at www.rvda.org.

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