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.