New Financing Plan for Auto Dealers from the SBA

With many auto, truck, and recreational vehicle dealers in trouble, the SBA has initiated a new loan program to help these businesses stay in business by financing their inventory. The new Dealer Floor Plan financing program will begin to offer line-of-credit loans to dealers starting July 1. The financing will be offered by SBA lenders, through the SBA's 7(a) loan program, and at 75 percent guarantee rates.

Details of Dealer Floor Plan Financing
The program is available to eligible auto, recreational vehicle (RV), boat, manufactured home and other dealerships. The dealer must apply to an SBA lender, providing a listing of titled inventory and values, along with a detailed business plan. The line of credit is issued for a minimum of $500,000 and a maximum of $2 million, for up to 5 years. As the inventory is sold, the dealer pays off the credit line. The program is a pilot, continuing until September 2010, at which time it will be re-evaluated.

What is Going On with Dealers
As I read the FAQ from the SBA on this new loan program, some interesting information came to light. Many dealers may be turning to parts and service to support themselves. No surprise, since parts and service represent a large share of a dealer's business profits. GMAC is still assisting GM and Chrysler dealers that will continue, but not for dealers that have been downsized.