It was hard for U.S. Rep. Joe Donnelly to contain his enthusiasm.
Something he and other Hoosiers, including fellow Democrat Sen. Evan Bayh, have been working on for months, became reality, according to the South Bend (Ind.) Tribune.
Beginning July 1, the U.S. Small Business Administration will offer government-guaranteed loans to finance inventory for eligible automobile, recreational vehicle, boat, motorcycle and manufactured housing dealerships. Donnelly, D-Ind., said the move is another piece to the puzzle that could get the cycle of business moving again in places like Elkhart County, part of which is located in Donnelly’s congressional district.
“This is very significant,” Donnelly said in a phone interview after attending Thursday’s announcement in Kokomo, Ind., by Karen Mills, SBA administrator.
“It’s not just RV related, but includes marine and manufactured housing. Those are three types of mainstay products in Elkhart County, and this covers every single one of those areas.
“It gives dealers a chance to finance floorplanning,” he added. “That enables the dealers to buy more products from manufacturers and for (manufacturers) to put more people back to work.”
For the past year and a half, many dealers had been unable to purchase cars and RVs to place on their lots, because the dealers themselves did not have the financing.
Organizations they had been getting loans from either refused to make loans as credit tightened, or simply walked away from the business.
“This ends the cycle,” Donnelly said, noting it allows more than 50% of the dealers to use the program. “We think this is a big step in putting people back to work.”
“The whole country starts buying again,” Donnelly said. “Since we do the manufacturing for all these products, all of that (business) will start to flow back into our community.”
Donnelly said Bayh greatly aided the effort. Donnelly himself had met with both Treasury Secretary Timothy Geithner and President Barack Obama about the problem, urging the SBA solution to guarantee the loans.
“I met with Geithner and explained the whole situation,” Donnelly said. “I had conversations with Obama last fall on the way to Elkhart and with him again last week.
“He has been very desirous to find a vehicle to create this financing.”
In a release, Bayh, who was also in Kokomo for Thursday’s announcement along with Ed Montgomery, director of recovery for auto communities and workers, said the program “will help keep open a business that might otherwise have closed.”
“Dealerships employ tens of thousands of Hoosiers and today’s announcement will both save jobs and create new ones,” Bayh said. “For a state like ours, with a proud manufacturing tradition, this announcement is truly a lifeline.”
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.
The Recreation Vehicle Industry Association (RVIA) called the program “a key victory on an important front.”
“RVIA has worked diligently over the past several months to have the SBA include floor plan loans in 7(a) loan guarantee program,” said RVIA President Richard Coon. “We are very pleased with the SBA announcement today and believe that the improved availability of credit for RV dealers through this program will benefit the entire industry.”
The program announced Thursday is considered a pilot program and will run from July 1 through Sept. 30, 2010, at which time the SBA will determine whether to extend the program.
The RV industry is making products that are not only environmentally friendly but also accepted by the majority of the RVing public, a spokesman for the Recreation Vehicle Industry Association (RVIA) told an audience in Elkhart, Ind., on Monday (April 6).
B.J. Thompson, an RVIA board member, chairman of the PR committee and a member of the Go RVing Coalition, noted during the panel discussion hosted by U.S. Rep. Joe Donnelly, D-Ind., “Right now, we are seeing manufacturers and suppliers that are building products that are greener and more energy-efficient than ever before.”
The forum was titled “Investing in Tomorrow’s Jobs Today” and Thompson illustrated how the RV industry is already moving toward the future. For example:
- On supplier side, Dometic Corp. is offering RV appliances that are feature environmentally friendly coolants and energy-save features.
- Winnebago Industries Inc. is building a Class A motorhome on a Frieghtliner hybrid
chassis that is 20% more efficient than other Class A motorhomes.
- Jayco Inc., Forest River Inc. and Coachmen RV are building Class C motorhomes on fuel-efficient Sprinter chassis.
- Other manufacturers are building ultralight travel trailers using composite materials.
Thompson cited recent RVIA research that showed 64% of consumers said they would pay more for a green RV that offers environmentally-friendly components, and that almost half of the respondents indicated that they would be willing to pay up to 25% more for these units.
“This news is not lost on RV manufacturers and suppliers,” he said.
Further, he noted other surveys that show RVing leaves 50% less of a carbon imprint than a traditional vacation involving air travel, car and hotel accommodations.
Thompson also acknowledged the work Donnelly has done for the RV industry. He spoke privately with Donnelly following the panel discussion.
“I got the sense he is very much committed to helping us out just about any way we can ask him to help us,” Thompson told RVBusiness. “He does genuinely seem to be committed to helping us. I’m glad we have him on our side, along with Congressmen (U.S. Rep. Mark) Souder and Sen. (Evan) Bayh.”
The nominee to head the Small Business Administration promised today (April 1) to see what she can do provide loans to RV and car dealers to pay for their inventories.
The pledge from Karen Mills nudges the Obama administration’s position closer to what the RV and auto dealers have said is their top priority: easing credit so dealers can purchase the cars, trucks and RVs for their showroom floors, according to the Fort Wayne (Ind.) Journal Gazette.
Asked last week what was being done to help dealers get financing, Treasury Secretary Tim Geithner was less specific. “We’re working on it,” he told a Senate committee. “We think it would be helpful as a part of the overall solution, and I’d certainly be able to tell you and your colleagues in the next couple days what we think is possible, what’s not possible.”
One thing that should be possible, Sen. Evan Bayh, D-Ind., said at Mills’ confirmation hearing, is for dealers to be eligible for SBA loans to finance their inventories. Car and RV dealers must pay the manufacturers when they order a vehicle, not when it is sold. Dealers usually finance the inventory through the financial arm of their manufacturer or a bank. But with tightened credit, those loans have dried up. Under current rules, those vehicle inventory financing – called “floorplans” – are not eligible for SBA loans.
“These people are hurting. The president came to Elkhart wanting to help,” Bayh told Mills. “This is one way to provide real relief to these people.”
He asked if she would support making SBA loans eligible for purchasing inventory. Mills said she “would be very interested to look at that quickly and see what the possibilities are to help.”
Nearly half of all employees in the entire RV industry, which is centered in Elkhart County, have lost their jobs. Elkhart County’s 18% unemployment is the highest in the nation.
The auto dealers’ trade association has said that easing credit for stocking their dealerships is the most important issue facing the retail side of the car, truck and RV industries. John McEleney, chairman of the National Automobile Dealers Association, issued a statement that “vehicle inventory financing is the building block to automaker viability. It affects the entire auto retail network, domestic and international.” He said that finding a way to extend credit to dealerships “is essential not only to a healthy automotive industry, but to the overall economic recovery.”
The Recreation Vehicle Industry Association (RVIA) continues to work on all fronts in an effort to free up credit for RV dealers and consumers and help the industry recover from the current severe economic crisis.
Currently one focus of the association’s efforts is expanding the Small Business Administration’s (SBA) 7(a) lending program to benefit the RV industry, according to an RVIA release.
The SBA’s 7(a) loans are partially-guaranteed loans that are issued by a bank to a small businesses to support its operations. SBA recently raised guarantees for 7(a) loans from 75% to 90% and eliminated or cut borrower fees on these loans. While small businesses can currently secure up to $2 million under the 7(a) program for working capital, machinery and equipment, and in some cases debt financing, these monies cannot currently be used for dealer floorplan loans to purchase new inventory. Financing for floorplanning would provide much-needed working capital for RV dealers and would result in retention of thousands of jobs, RVIA contends.
At RVIA’s request, Sens. Ron Wyden, D-Ore., Evan Bayh , D-Ind., and Jeff Merkley, D-Ore., sent a joint letter to the SBA’s acting administrator asking for specific inclusions in the program that will help the RV industry. Sen. Richard Lugar, R-Ind., also sent a letter on the same topic to the SBA acting administrator.
The senators requested that RV dealer floor plan loans be included in SBA’s 7(a) guarantee program, saying, “The most helpful change in SBA policy would be to permit the financing of RV floorplan loans (for business inventory) as a temporary eligible activity through Dec. 11, 2011, in the 7(a) loan guarantee program.”
They also requested that the SBA temporarily adjust the standard for what it considers to be a “small” business. Currently the SBA considers small businesses to be companies with less than $7 million in gross earnings averaged over three years. The senators requested “that the SBA immediately change the small business definition for recreational vehicle dealers to allow increased RV dealership participation in the 7(a) loan program.” The senators also suggested SBA could change the definition of a small business to be one that employs 500 or fewer employees. Alternatively they suggested the SBA could “modify its definition to allow RV dealerships with up to $25 million in sales to participate, similar to the criteria for new car dealers.”
In arguing for the changes to the SBA program, the senators wrote, “During the Carter administration, automobile dealers sought and were granted an emergency rule through SBA that temporarily allowed dealers who sold fewer than 950 vehicles per year to qualify for SBA loans. The need for urgent action is as appropriate today as it was 30 years ago.”