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.”