President Obama will ask lawmakers for legislation boosting the maximum size of three types of Small Business Administration loans, the White House said Wednesday.
The proposed bill is part of the administration’s three-pronged initiative to free up credit for small businesses, according to the Dow Jones News Service.
In addition to the loan legislation, the White House will make it easier for small banks to provide credit to small businesses under the Treasury Department’s Financial Stability Plan.
The president also will call for Treasury Secretary Tim Geithner and SBA Administrator Karen Mills to convene a conference of regulators, congressional leaders and small business owners to establish further steps the government can take to help small businesses get better access to capital.
The SBA in July made guaranteed floorplan loans available to RV dealers, but few have taken advantage of the program because of the $2 million loan limit and financial institutions reluctance to participate.
The focus on small businesses comes as the White House begins to wind down other pieces of the Troubled Asset Relief Program (TARP).
White House spokesman Robert Gibbs said Obama hears daily from small businesses struggling to get access to credit.
PUBLISHER’S NOTE: RVBUSINESS.com received this letter – an appeal for help through the press from an imperiled Texas dealership faced with ongoing floor plan credit woes, and we thought we would indeed pass it along.
WE NEED YOUR HELP!!!!!!!!!!!!!
We are a small family-owned recreational vehicle sales & service dealership in Selma Texas. We have been in business for five years. We have been a profitable business for five years due to hard work, dedication, and help from family, friends and financial institutions.
As we know, despite massive infusions of taxpayer dollars, many banks are still not lending to American businesses. Many profitable companies are finding our existing credit lines limited or, worse, eliminated.
We have had a strong relationship with Textron Financial for over three years. Our wholesale financing (floorplan) has increased from $750,000 to $1,450,000 in this short period of time. This has been accomplished due to increases in volume, profits, and credibility.
On October 29th, 2008, Textron Financial sent out a letter to its wholesale RV customers (including us) stating their “commitment to the RV Industry for many years to come. Also stated was that their borrowing costs had risen, but remain strong.” Also, that they have had no difficulty raising capital in order to fund their customers. The letter did mention they had to change some ways they conducted business. For instance, increase in rates and different base pricing structure. I did agree to the changes, and stayed loyal to Textron.
On December 22, 2008, however, we were contacted by a vendor of ours letting us know Textron was leaving the RV lending sector. I researched on the Internet and to my surprise it was true.
So, at that point in time I started looking for other sources for inventory floor plan. Since the banking industry had already started in the downward spiral, you can imagine what I was going through, and still am. No lenders were opening new lines of floor plan credit to RV dealers. I have searched local lenders, friends, and investment groups with no luck. This has put us in a financial crisis. When I sell an existing RV in stock I cannot replace it. I am now in a position I cannot continue operating under these conditions without help. This is the reason for this letter.
Now with the help of Senators Bayh (D-IN), Lugar (R-IN), Merkley (D-OR) and Wyden (D-OR) and Representatives De Fazio (D-OR), Donnelly (D-IN) and Souder (R-IN), the SBA has incorporated “Floor Plan” lending into its 7 (a) program. This had us, for lack of words, “dancing in the street in celebration.”
Now we have started contacting banks and credit unions asking for their help with this SBA-supported program. We have contacted as many as 14 institutions and are getting the same answer: “We still will not loan money for floor plan”.
We have even contacted Kenan Pankau, lending manager with Randolph Brooks Federal Credit Union, which has won the SBA Credit Union Lender of the Year award announced at the National Small Business Week held in Washington D.C., May 17, 2009, and received the same general answer: “Its not in our policy to lend money for flooring even with this new program.”
My question now is why Janice Mills, Senators and Representatives went through all the trouble of getting this passed, and the banking industry still will not help? As one banker stated “It’s still our money, regardless of what the government has to offer.”
I am sure I speak for all RV dealers, please, we urge you to force lending institutions to help as everyone else has. Please help us RV dealers and their employees in their struggle for survival. Also the ARC loans are also impossible to get. As of 10/01/2009, there have only been 11 approved applications for SBA floor plan guaranteed loans.
Please pass this on to your Congressman.
THIS IS AN URGENT PLEA!!!!!!!!!!!!!!!!!!
Ballard’s Freedom RV LLC
16719 Pawlin Drive
Selma, Texas 78154
Beginning in this month, eligible RV dealerships can apply for SBA-guaranteed dealer floorplan (DFP) financing under the Small Business Administration’s new DFP Pilot Program.
The Recreation Vehicle Dealers Association (RVDA) and its allies supported this type of program, which follows the establishment of new eligibility standards that will allow hundreds of more RV dealers to apply for loans under the SBA program, according to an RVDA news release. RVDA however, would like to see more incentives, and the elimination of certain disincentives, so that more banks get involved in the SBA loan guarantee program.
Several dealers tell RVDA that lenders are not jumping on board to participate in the floorplan program. RVDA will submit federal comments requesting further revisions and bank incentives.
The DFP program will provide loan guarantees for lines of credit through its 7(a) program through Sept. 30, 2010, at which time an extension of the program will be considered. DFP loans will be made through SBA lenders only for “titleable” inventory, including RVs, autos, manufactured homes, boats and motorcycles.
DFP loans will be available for a minimum of $500,000 up to $2 million. With a maximum repayment term of five years, the loans will come with a 75% SBA guarantee for the first 80% of the DFP loans. Borrowers will also benefit from the temporary elimination of fees on 7(a) loans made possible by the America’s Recovery and Reinvestment Act of 2009.
It is important to note that lenders may now establish a higher advance rate. Lenders can advance the entire wholesale price of the units floorplanned. However, the SBA maximum guaranty to the lender will only be 75% of an 80% loan.
For example, if a lender has an advance rate of 100% for all inventory, the maximum SBA guaranty will be 67.5% for new automobile inventory and 60% for RVs and all other inventory financed by the lender. The lender will need to identify the advance rate and calculate the maximum allowable guaranty percentage for each loan on the lender’s application for guaranty.
RVDA will provide more details on the program to members as they become available.
Visit the RVDA Lenders Toolbox at www.rvda.org for more information.
Is there a change afoot in the RV finance arena that perhaps reflects an overall prospect for improvement in the U.S. economy and the recreational vehicle marketplace?
That’s hard to say. Based solely on the fact that Bank of America Dealer Financial Services and GE Commercial Distribution Finance — the two big dogs in RV finance — are talking to the press lately after months of silence during the depths of the recession, it’s certainly beginning to look that way.
Ellsworth “Ellie” Clarke, president of B of A’s Dealer Financial Services, last week provided an overview of B of A’s programs and the RV market in an interview with Jeff Kurowski, director of industry relations for the Recreation Vehicle Dealers Association (RVDA), that was posted on RVBUSINESS.com. And only yesterday (July 1), GE Commercial Distribution Finance’s Pete K. Lannon, managing director and president of GE Capital’s Motorsports and RV Group, addressed modifications to GE curtailment policies in a wide-ranging interview with RV Business.
Lannon also fielded questions on an array of other related topics, the crux of which is as follows:
What can you tell us about finance rates in general? We’re told that they spiked for GE in March across the board – including both the RV and marine sectors. Do you anticipate any sort of an easing of interest rates?
There are a lot of factors that go into interest rates. Part of it is the macro-economic environment, the general cost of funds and what it takes to raise funds in the marketplace. Another component is our cost of operations, and then there’s a risk component. So, we’re attuned to all of these items, and we would make rate adjustments in accordance with what they are telling us.
The Small Business Administration is beginning to provide floorplan financing for RV retailers. Has this played into any of GE’s decision, announced yesterday, to moderate its curtailment interest rates?
I think it’s a little early to see exactly how it (SBA financing) is going to be implemented. The SBA is still concluding its regulations, formulations, etc. I think any additional (financing) capacity in the industry for dealers certainly is welcome, particularly for dealers that are challenged. We just need to see what the final formulation is from the SBA. It’s still somewhat uncertain.
We’re told that GE occupies about a 25-35% share of the RV marketplace’s wholesale financing. Is GE looking to increase that share?
We have a significant share. I’m not going to speculate as to the exact amount, but we know we’re a significant player in the industry. We look to increase business that makes sense, that’s profitable for both us and for our dealers. Whether that leads to market share or not … we’re still dealing with an industry that’s been heavily impacted, and I think most of us are thinking more about just getting to the right size versus getting into a market share ‘game’ at the moment.
‘Right size’ could be applied to the RV industry as a whole. Do you feel that there may in fact still be too many dealers, as some have argued, for a downsize market?
I don’t know about too many dealers… What we’ve got is a situation (where) there’s still an imbalance of inventory in the field to the sell-through at retail. I don’t speculate whether it’s too many dealers. I do know that there’s too many units available right now. It’s depressing the sales prices of the inventory dealers are holding, and there just aren’t enough customers willing or able to make the purchase at the dealer level. We need a better balance for the industry to get healthy again.
So, GE’s decision to eliminate the interest hike isn’t necessarily a reflection of the company’s more confident outlook on the state of the industry?
We do have a fairly confident outlook. Let’s put it this way: we’re ‘cautiously optimistic.’ At this point, I don’t know if we’ve found the bottom quite yet, but if we haven’t, we’re awfully close. We’re seeing some positive indications in our RV business with the way inventory levels have come down, and dealer performance metrics are improving. They’re not healthy yet – we’re not prepared to make that statement – but we’ve seen a couple of months of upward trends in some important performance metrics that indicate that we think we are near, or have found, the bottom.
If you want to take a step up and look across the entire economy, Jeff Immelt, GE’s chairman and CEO, was quoted in London today (June 30) on behalf of GE with an outlook that said, “things seem to be brightening.” Again, I don’t think anyone’s prepared to say that things are where they should be or that they are absolutely healthy, but I think overall in a lot of areas besides the RV industry we are seeing signs of improvement on a lot of different fronts.
Another leading finance provider is telling the industry right now that they are in it “for the long haul.” Is GE?
We are going to continue to invest in and support this industry. We’ve been a very long-term player in this industry. When you think about the predecessor companies that were acquired by GE, we go back in the RV industry at least to the late ’70s, and our intention is to make sure that we are here through this cycle and back when the industry is healthy again. We want to be a participant in that.
President Obama’s car czar came to Kokomo, Ind., Thursday (May 28) to announce much needed aid for the state’s auto dealers. But the help is not just for auto dealers. It’s also for hard hit areas that manufacture RVs.
The Small Business Administration (SBA) and President Obama’s car czar announced a nationwide stimulus plan in the heart of Indiana’s auto industry, planting what they hope is a seed in the industry’s recovery, according to WTHR-TV, Indianapolis.
“We’re not giving up on manufacturing and I’m sure the president hasn’t given up on the auto industry,” said Ed Montgomery, director of recovery for auto communities and workers.
The SBA announced that it will back billions in government guaranteed loans to finance inventory for auto, RV, boat and other dealerships. The so-called floor plan financing starting July 1 gives dealers up to $2 million in much needed credit allowing business owners to borrow against inventory.
“These programs all will give dealers the breathing room that they need, the financing that they need to survive these times when sales are a bit down,” said Karen Mills, SBA administrator.
The federal and congressional delegation chose to announce the nationwide pilot program in Kokomo, where Chrysler’s biggest single work force is now coping with the automaker in bankruptcy. The government hopes the dealer financing will create a ripple effect in an industry that employs thousands of Indiana workers.
“Today’s announcement will help to preserve jobs in the auto dealers, auto manufacturers, the supply chain, small businessmen and women who supply the auto industry and in the recreational industry,” said Sen. Evan Bayh, D-Ind.
The new SBA program includes northern Indiana’s Elkhart County’s struggling recreational vehicle industry, accounting for a nearly 20% unemployment rate there.
“This is going to help dealerships be able to buy the products that the customers want to buy,” said Nathan Hart of the Recreation Vehicle Dealers Association (RVDA).
The National Automobile Dealers Association (NADA) and their members call the new stimulus plan a step in the right direction.
With automakers down-sizing dealers and with GM on the brink of bankruptcy, floorplan financing will likely do little to comfort thousands of Indiana auto workers wondering how long they’ll have a job.
One auto dealer said this week that access to credit is a major problem. The SBA said that the loans will allow dealership to keep their inventory and cash flow intact and save jobs.
The Recreation Vehicle Industry Association (RVIA) and Recreation Vehicle Dealers Association (RVDA) reacted positively today (May 28) to an announcement that the Small Business Administration (SBA) will offer government guaranteed loans for floorplan financing for eligible RV, auto and boat dealerships.
The good news came from SBA Administrator Karen Mills in Kokomo, Ind., who was accompanied by Ed Montgomery, President Obama’s director of recovery for auto communities and workers at a meeting involving local officials, small busnessmen, labor representatives and community leaders.
Dealer floorplan financing (DFP) will be available beginning July 1, according to Mills.
“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,” said RVIA President Richard Coon. “RVIA has worked diligently over the past several months to have the SBA include floorplan loans in 7(a) loan guarantee program.”
“This is good news for RV dealers,” said RVDA President Mike Molino. “Securing floorplan financing is vital for the health of the RV industry and the millions of customers who enjoy RV travel. We look forward to working with SBA and lenders to make this program a success.”
Floorplan 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.
In Kokomo, Mills said that countless small businesses, including dealerships, across the country are facing significant challenges as a result of the uncertainty in the auto industry. “Floorplan financing can offer some dealerships the opportunity to get through these tough economic times by allowing them to keep their inventory and cash flow intact, as well as save the jobs these small businesses provide,” she said.
Mills and Montgomery discussed the new DFP pilot program, as well as other resources offered by SBA and the federal government to help small businesses in communities impacted by the troubles facing the auto industry.
“Small businesses are the engine of our economic growth,” Montgomery said. “We are committed to finding ways the federal government can cut through red tape and get resources to these companies quickly during these tough economic times.
“From supporting nearly $4 billion in lending to small businesses across the country since February to the dealer floorplan financing announced today,” he added, “the SBA is making the resources provided in the Recovery Act accessible and working to provided needed credit. The president is committed to continuing to work with federal officials to identify resources like these that make a real difference in the lives of our auto communities and workers.”
Under the DFP pilot program, the SBA will provide loan guarantees for lines of credit through its 7(a) program. DFP loans will be made through SBA lenders only for titled inventory, including autos, RVs, manufactured homes, boats and motorcycles.
The pilot program will be available through Sept. 30, 2010, at which time the SBA will make the determination of whether or not to extend the program.
DFP loans will be available for a minimum of $500,000 up to the $2 million allowable under the 7(a) program. With a maximum repayment term of five years, the loans will come with a 75% government guarantee. Borrowers will also benefit from the temporary elimination of fees on 7(a) loans made possible by the America’s Recovery and Reinvestment Act of 2009.
“We are committed to being the real partner small businesses need at this critical time,” Mills said. “Floorplan financing is just the latest tool in our toolbox to help small businesses in communities like Kokomo weather this recession and drive our nation’s economic recovery.”
The U.S. Small Business Administration (SBA) plans to offer government guaranteed loans to finance inventory for eligible auto, recreational vehicle, boat and other dealerships under a new pilot program announced in Kokomo, Ind., today by SBA Administrator Karen Mills, according to the Indianapolis Star.
The so-called dealer floorplan financing will be available beginning July 1, according to Mills.
She announced the new program during a visit to Howard County with Ed Montgomery, President Obama’s director of recovery for auto communities and workers.
“Countless small businesses, including dealerships, across the country are facing significant challenges as a result of the uncertainty in the auto industry,” Mills said. “Floorplan financing can offer some dealerships the opportunity to get through these tough economic times by allowing them to keep their inventory and cash flow intact, as well as save the jobs these small businesses provide.”
Floorplan 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.
Sen. Evan Bayh, D-Ind., a member of the Senate Small Business Committee, Thursday (May 14) praised the Small Business Administration (SBA) for expanding the agency’s largest lending program, a decision that will expand access to capital for more than 70,000 additional American small businesses — including many RV and automobile dealerships across the country.
The SBA last week announced an expansion of its 7(a) loan program, effective next week through Sept. 30, 2010, according to a press release. The temporary 7(a) loan size standard will allow businesses to qualify based on net and average income. Under the new rules, a small business qualifies for SBA loan assistance if:
- The company and its affiliates have a net worth not exceeding $8.5 million and
- The company and its affiliates’ net income over the preceding two completed fiscal years does not exceed $3 million after federal income taxes (excluding any carry-over losses)
It is estimated that 50% of RV manufacturers and 75% of RV dealers will now qualify for loans under the SBA’s expanded criteria.
“To turn around our economy and help middle class Hoosiers make ends meet, we have to free up capital for small businesses, which are the primary engine of Indiana’s economic growth,” Bayh said. “This is a significant expansion of the largest federal loan program to help small businesses meet payroll and other operating costs. This move by the SBA will provide a lifeline to Indiana’s auto dealers, parts suppliers, and RV manufacturers and help thousands of middle class families who rely on these industries to make a living.”
“We’re encouraged that the SBA is expanding the definition of businesses that qualify for SBA loans to support investments in working capital, machinery and equipment,” said Richard Coon, president of the Recreation Vehicle Industry Association (RVIA). According to Coon, the direct consequence of the current credit squeeze for worthy companies has been lost jobs with RV manufacturers, suppliers and dealers.
“The new loan criteria couldn’t come at a more important time,” Coon added. “When coupled with an emergency rule being considered to permit 7(a) guarantees for dealer floor-plan inventory purchases, these new SBA changes will benefit a large segment of RV manufacturers, dealers and suppliers.”
Bayh continues to urge the SBA to expand the 7(a) loan program to include purchases of floorplan inventory, a change that would provide much-needed working capital for RV dealers and result in the retention of thousands of jobs nationally, including many in Indiana.
For more information about SBA’s revisions to its small business size standards, visit http://www.sba.gov/size/indexwhatsnew.html and click on “Small Business Size Standards.”
Editor’s Note: This is an updated version of an earlier story based on a news release from the Recreation Vehicle Industry Association.
With the nation’s credit freeze continuing to be the top challenge facing the RV industry, the Recreation Vehicle Industry Association (RVIA) and its industry partners have been working diligently on several fronts to expand the availability of credit to RV manufacturers, suppliers, and dealers. RVIA’s efforts gained momentum this week with the Small Business Administration (SBA) now considering waiving the floor plan lending prohibition that is currently part of its 7(a) loan guarantee program.
The SBA is considering plans to change current policy that precludes financing of RV floor plan loans through the 7(a) loan guarantee program. The SBA would temporarily permit floor plan lines of credit for assets which are “titleable” (RVs, cars, trailers, motorcycles, and boats). The specific timeline and parameters of the program are still being determined.
RVIA and its industry partners worked in March with Sens. Ron Wyden, D-Ore., Evan Bayh, D-Ind., and Jeff Merkley, D-Ore., to send a letter to the Acting SBA Administrator requesting a program change. Sen. Dick Lugar, R-Ind., and Rep. Peter De Fazio, D-Ore., sent letters on the same topic. In a March 31 response to Sen. Lugar, the SBA acknowledged that they were “reevaluating their policy precluding the financing of RV floor plan loans.” On April 1, Sen. Bayh asked a question on RV floor plan loans at the confirmation hearing of Karen Mills to head the SBA. Mills committed to quickly review the floor plan lending restrictions.
Using their pilot program authority, the SBA plans a “use of proceeds” program to provide dealers with lines of credit through SBA approved bank lenders. As a pilot program, it would need the approval of the Office of Management and Budget (OMB) as well as be subject to a 15-day review period by Congress.
This policy change would help improve the availability of credit for many RV dealers to purchase new inventory from manufacturers. A Federal Register Notice announcing the program is expected this month
The expected move to allow floor plan lending comes on the heels of the SBA expanding the eligibility for its 7(a) loan program, which allowed greater access to capital for more RV manufacturers, suppliers and dealers who now qualify as small businesses.
With the availability of credit the RV industry’s No. 1 issue, the Recreation Vehicle Industry Association (RVIA) and its industry partners have been working on several fronts to expand the alternatives for credit and have been successful with one effort to provide floorplan lending for dealers through the Small Business Administration (SBA).
The SBA will announce shortly plans to change current policy that precludes financing of RV floor plan loans through the 7(a) loan guarantee program, the RVIA stated in a news release. “This is great news since the SBA has moved with some urgency to temporarily permit floorplan lines of credit for assets which are ‘titleable’ (RVs, cars, trailers, motorcycles, and boats),” RVIA stated.
This week, the SBA told RVIA that effective on May 17, the agency will waive the floor plan lending prohibition. Using their pilot program authority, the SBA plans a “use of proceeds” program to provide dealers with lines of credit through SBA-approved bank lenders. The program will be effective May 17, 2009, through Sept. 30, 2010.
“This policy change should improve the availability of credit for many RV dealers to purchase new inventory from manufacturers. Details of the program as described to us are outlined below. A Federal Register Notice announcing the program should be released next week,” RVIA said.
Among the features are the following:
- Asset-based line of credit between $500,000 and $2 million, available for “titleable” assets through existing SBA lenders (does not have to be an existing floorplan lender).
- Since some states do not require titling of all trailers and truck campers, the SBA may address assets that require a Vehicle identification number (VIN) instead of “titleable asset.”
Applicants must meet SBA 7(a) program eligibility requirements including:
- The program is limited to businesses with a tangible net worth of $8.5 million or less and an average net income in the last two completed fiscal years of $3 million or less, excluding carry over losses.
- Rules of affinity apply toward the size standard (example of family-owned business with affiliates owned by other family members–all would count toward size standard.
- “Credit Elsewhere” Policy Applies – Requires financial statements of owners with 20% or greater ownership to determine whether their liquid assets are an alternative source of funds.
- Personal Guarantee – Requires a personal guarantee from each owner with 20% or more ownership.
The Small Business Administration today (May 1) increased the number of RV manufacturers, dealers and even campgrounds qualifying for loan guarantees.
However, dealer floorplans loans were not included at this point.
That,too, may change.
”The good news is that it allows more companies to be eligible under the loan program,” said Bill Baker, senior director of communications for the Recreation Vehicle Industry Association (RVIA).
Baker estimated that about 75% of RV dealers and 50% of RV manufacturers, many of which are small companies, will be able to qualify under the SBA 7(a) loan program. ”These are just rough estimates, he said.
At the same time, the Recreation Vehicle Dealers Association (RVDA) estimated that ”hundreds” of RV dealerships will become eligible for loan guarantees under the new alternative rule. ”It’s a great first step,” said Phil Ingrassia, RVDA vice president for communications.
Previously, companies had to have an average of less than $7 million in annual gross revenues over three years to qualify for up to $2 million in loans with 90% guaranteed under the SBA 7(a) loan program.
For those companies that don’t qualify under those provisions, the expanded rules require a firm to have a net worth of less than $8.5 million and after-tax income of less $3 million over the preceding two years.
The SBA estimated that in total, 70,000 additional small businesses will be eligible for loan guarantees under the program. Although all small businesses may qualify, particular attention has fallen on the auto and RV industry because of the extent to which they are being squeezed by tighter lending requirements at both the retail and wholesale levels.
While the new standards don’t address floorplan loan guarantees, ”We are still looking into the possibility,” SBA spokesman Mike Stamler told RVBusiness.
Trying to get the SBA to guarantee floorplans loans continues to be an RVIA priority. ”We are continuing to lobby as hard as we can in that respect,” said RVIA President Richard Coon.
President Barack Obama foreshadowed the SBA’s announcement during a speech Thursday after the bankruptcy of Chrysler LLC, the nation’s No. 3 domestic auto manufacturer.
RVIA and RVDA and state dealers associations have been lobbying the SBA to allow more companies in the RV sector to qualify for the loan program. The two groups also had pushed for companies with fewer than 500 employees to qualify, regardless of company income or net worth — a qualifier rejected by the SBA.
‘This is just on more step we are taking to make sure small businesses have access to capital to keep their doors open and employees working during these tough economic times,” SBA Administrator Karen Mills said in a press release.
”We have seen signs that small businesses that are just outside the traditional size standard are being shut out of the conventional lending market. This temporary change will help those business weather these tough times and help move our nation closer to economic recovery.”
President Obama said today (April 30) that the Small Business Administration (SBA) on Friday will announce “expanding eligibility” for loans to automotive suppliers and dealers, including “RV dealers.”
In a noontime speech while commenting on Chrysler Corp.’s impending bankruptcy, Obama said the federal government will provide independent finance company GMAC with the capital to supply retail and floorplan loans to Chrysler dealers and others.
“We will be providing additional capital to GMAC to help unlock our frozen credit markets and free up lending so that consumers can get auto loans and dealers can finance their inventories; a measure that will help stabilize not only the auto market, but the broader economy, as well,” the president said. “And tomorrow, the Small Business Administration will be announcing it is expanding eligibility for some loans to include more supplier and dealers, including RV dealers.”
The Associated Press reported that the president struck a populist tone during the speech while criticizing “a group of investment firms and hedge funds (who) decided to hold out for the prospect of an unjustified taxpayer-funded bailout” for Chrysler Corp.
“They were hoping that everybody else would make sacrifices, and they would have to make none,” he said. “Some demanded twice what they were getting. I don’t stand with them.
“I stand with Chrysler’s employees and their families and communities. I stand with Chrysler’s management, its dealers and the millions of Americans who own and want to buy Chrysler cars. I don’t stand with those who held out when everybody else is making sacrifices.”
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.”