Editor’s Note: Participants at the Feb. 5 Dealer Floor Plan Financing Conference in Elkhart, Ind., organized by U.S. Rep, Joe Donnelly, D-Ind., shared these additional thoughts following the conference. Among the speakers was Peter Lannon, president of Motorsports & Recreational Vehicle Group, Commercial Distribution Finance, GE Capital Solutions, which is the leading player in the RV finance sector. He told RVBUSINESS.com “We are committed to this industry, and we believe in its future success.”
Congressman Donnelly: “I think it was terrific because it brought together dealers, manufacturers, banks and the SBA. And what we’re all trying to do is figure out how do we make it so that consumers that should be getting a loan can get a loan, and the same for floorplan financing. So, we’re trying to find out what problems are being faced and then figure out how to fix those problems.”
(RVBUSINESS asked, Is the message in general, that, while things are clearly improving economically, that the recession is still lingering? “Right, we’re making progress, but we’ve got a long way to go. It’s one of those three yards-and-a-cloud-of-dust-type situations. And I think we’re going to continue to make progress every month. And if we can get this financing situation to work smoother, it will help us get out of it even quicker.”
Peter K. Lannon, president, Motorsports & Recreational Vehicle Group, Commercial Distribution Finance, GE Capital Solutions: “The SBA’s trying to retool its program. They haven’t had a great deal of success. And the banks, as we’ve heard today, are struggling to get their arms around it. The program needs probably some adjustment if it’s going to be effective, going forward. And I’m thankful that they had the meeting because additional liquidity in the industry’s always going to be helpful. Nobody can take all customers. Having multiple participants is healthy for the industry.”
GE’s view of the RV market as it climbs out of the recession? “We’re very optimistic right now. We believe the dealer base stabilized. Dealers are focused on turning the product. Manufacturers are also focused on that very same issue – not just shipping into the dealers, but making sure the dealers, in turn, are selling it to a retail customer. And that’s a very healthy foundation for this industry to be on. So, we are growing right now, and we are committed to this industry, and we believe in its future success.”
Bill Fenech, president of Thor Motorized: “I think Joe Donnelly has a grasp of what our needs are. Unfortunately, I don’t think there’s a connection between what the banks need to do SBA loans for floorplan financing. And basically, my takeaway is that it’s either too cumbersome or there’s something wrong with the process that makes them not want to do it (make SBA-backed loans). I know dealers that have tried and the banks just basically walked away. So, I think Joe gets it. He’s asking good questions. I don’t think we have the answers yet.”
Does SBA get it? “No,” adds Fenech, “not for the level we need it to be.”
Monaco RV LLC Chief Legal Counsel Richard Bond: Bond submitted the following comments in a follow-up e-mail.
1. Local Banks. It is evident that for the “local banks” who claim to lack the infrastructure to service wholesale floor plan financing, the current SBA program incentives are insufficient to get them to enter the game, even with possible increases to a $5M limit and 90% guaranty. Notable was the comment by First Source Bank (a northern Indiana bank based in South Bend) that in its presently constituted format of a pilot program expiring toward the end of 2010, the SBA program does not offer sufficient incentive for the banks to justify investing in the infrastructure because they need a longer payback period. First Source commented that a minimum program term commitment of perhaps 5 years could possibly be adequate to change the equation. However, before Congressman Donnelly runs with that idea in Washington, I think that (he) would want to do some further talking with the banks in order to get a higher comfort level that, in fact, such a longer program term would convince them to enter into wholesale floorplan financing for RV and marine dealers.
2. KeyBank. Unlike most of the others banks in attendance, KeyBank has had the infrastructure in place and has engaged in wholesale floor planning, but it now seems to have made the firm decision to exit this business line. It didn’t sound to me like any revisions to the SBA program are likely to change that decision.
3. GE. GE’s Peter Lannon, in the course of confirming that GE is actively financing RV and marine dealers across the country today, made a statement to the effect that the possibility of obtaining a 75% (or presumably even a 90%) guaranty from the SBA does not enter into GE’s loan analysis determination. Perhaps it is because GE is not interested in becoming involved in the “red tape” that compliance with the SBA program requires of the lender. It was also interesting to hear Mr. Lannon’s comment that for their RV and marine business, increasing the current SBA $2M limit to $5M is not a critical factor.
4. 504 Loans. The comment by Coachmen RV’s Mike Terlep on this topic was insightful. While efforts to make the SBA floorplan financing program successful should be continued, perhaps some emphasis should also be made on the availability of SBA 504 loans given the announcement being made today that they will now be available for the mortgage refinancing of owner-occupied commercial real estate. Such loans could help dealers improve their liquidity and allow them to appear more attractive to the national floor planners or perhaps even finance their used inventory with cash.