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.