U.S. Rep. Joe Donnelly, D-Ind., is hopeful the newly signed Small Business Jobs and Credit Act of 2010 will spur RV dealer wholesale floorplan lending through the Small Business Administration (SBA), even though the previous SBA approach fell short of expectations for many in the industry.
Donnelly was a key supporter of the act, which encompassed many of the suggestions he garnered from RV dealers, manufacturers and lenders at a forum he sponsored Feb. 5 in Elkhart, Ind. The new law extends the SBA’s Dealer Floor Plan Program, which Donnelly first called for through bipartisan legislation he introduced in July 2010.
Donnelly held a news conference today (Oct. 1) at Total Value RV on the north side of Elkhart to comment on the new law, which had bipartisan support.
The new law increases the limits on SBA guaranteed 7(a) loans from $2 million to as much as $5 million and for manufacturers in the 504 loan program, loans are increased up to $5.5 million.
“In effect what we saw passed was written and put together by the folks in Elkhart, from the RV and marine industries,” Donnelly told RVBUSINESS.com following his news conference. “It was dealers, manufacturers and the lenders saying, ‘Here’s what we need.’”
Donnelly said that lenders had told him that they were not interested in the original SBA program because of its Sept. 30 expiration date. The new law extends it for three years, which should now make it attractive, he said, and will make it easier for banks to track dealer inventory and reduce recordkeeping costs. He anticipates that more large banks, as well as smaller community banks, will now step forward to participate in the SBA program.
“I’m very happy that some of these fresh ideas have now become law and our government will work better for these businesses so important to growing the Hoosier economy,” Donnelly said at the conference
The new law, however, does not raise the SBA guarantee in floorplan loans from the current 75% to 90%, as had been requested by lenders at the Feb. 5 conference.
“We tried to get done, but there was not a willingness (by Congress) to increase it any higher,” he told RVBUSINESS.com.
“This bill provides an important option to RV dealers that will help make the wholesale purchase of RVs easier,” said BJ Thompson, president of BJ Thompson Associates and a board member and long-time Public Relations Committee Chairman for the Recreation Vehicle Industry Association (RVIA).
“Anytime we can remove hurdles and help fulfill the demand for RVs, that’s good for the economy,” said Thompson in the press release. “And by supporting this bill, Congressman Donnelly has again stepped up and continued to be a friend of the RV industry.“
The SBA’s Dealer Floor Plan (DFP) Financing Pilot Program was created in July 2009 to provide loan guarantees through SBA lenders for titleable assets such as autos, RVs, boats, and trailers through the SBA’s 7(a) loan program.
But the program fell short of its goal, and less than 50 auto dealers and just two RV dealers had taken part as of February.
Based on the feedback Donnelly received from dealers and lenders, he and Rep. Fred Upton, R-Mich., introduced H.R. 5734, The Dealer Floor Plan Program Extension and Improvement Act, in July that would extend the DFP program for five years.
Donnelly had written to congressional leaders strongly urging them to do more to help meet the needs of small business owners by expanding the lending limits to $5 million.
The new law additionally invests in current and future small business owners by providing grants to Small Business Development Centers. Dan Jones, president of the Business Development Corp., joined Donnelly at Total RV today to talk about the increased opportunities for small businesses.
“Many more companies are now eligible for SBA 504 loans,” said Jones. “The size of small businesses that qualify was increased. Those businesses having a tangible net worth of $15 million and 2-year average net income after federal income tax of $5 million are now eligible.
“Of special importance to small businesses that are struggling with existing high-interest loans or up-coming loan balloon payoffs, the SBA 504 loan program can now be used to refinance existing debt at lower rates for longer terms. There was also $505 million included in the legislation to continue fee relief on SBA 504 loans through the end of 2010. This fee waiver was first enacted in February 2009 as part of the American Recovery and Reinvestment Recovery Act (ARRA), and the new funds will allow borrowers who applied for SBA 504 loans under the ARRA program to save thousands of dollars in loan fees.”
“Access to credit is one of the most critical issues for small businesses right now,” said Donnelly. “With increased loan limits and increased training funding for current and future small business owners, we’re giving Hoosier small business owners the tools they need to succeed.”