The Recreation Vehicle Industry Association (RVIA) and Recreation Vehicle Dealers Association (RVDA) reacted positively today (May 28) to an announcement that the Small Business Administration (SBA) will offer government guaranteed loans for floorplan financing for eligible RV, auto and boat dealerships.
The good news came from SBA Administrator Karen Mills in Kokomo, Ind., who was accompanied by Ed Montgomery, President Obama’s director of recovery for auto communities and workers at a meeting involving local officials, small busnessmen, labor representatives and community leaders.
Dealer floorplan financing (DFP) will be available beginning July 1, according to Mills.
“We are very pleased with the SBA announcement today and believe that the improved availability of credit for RV dealers through this program will benefit the entire industry,” said RVIA President Richard Coon. “RVIA has worked diligently over the past several months to have the SBA include floorplan loans in 7(a) loan guarantee program.”
“This is good news for RV dealers,” said RVDA President Mike Molino. “Securing floorplan financing is vital for the health of the RV industry and the millions of customers who enjoy RV travel. We look forward to working with SBA and lenders to make this program a success.”
Floorplan financing is a line of credit that allows dealers to borrow against their inventory, and then repay that debt as they sell their inventory or borrow against the line of credit again to add new inventory.
In Kokomo, Mills said that countless small businesses, including dealerships, across the country are facing significant challenges as a result of the uncertainty in the auto industry. “Floorplan financing can offer some dealerships the opportunity to get through these tough economic times by allowing them to keep their inventory and cash flow intact, as well as save the jobs these small businesses provide,” she said.
Mills and Montgomery discussed the new DFP pilot program, as well as other resources offered by SBA and the federal government to help small businesses in communities impacted by the troubles facing the auto industry.
“Small businesses are the engine of our economic growth,” Montgomery said. “We are committed to finding ways the federal government can cut through red tape and get resources to these companies quickly during these tough economic times.
“From supporting nearly $4 billion in lending to small businesses across the country since February to the dealer floorplan financing announced today,” he added, “the SBA is making the resources provided in the Recovery Act accessible and working to provided needed credit. The president is committed to continuing to work with federal officials to identify resources like these that make a real difference in the lives of our auto communities and workers.”
Under the DFP pilot program, the SBA will provide loan guarantees for lines of credit through its 7(a) program. DFP loans will be made through SBA lenders only for titled inventory, including autos, RVs, manufactured homes, boats and motorcycles.
The pilot program will be available through Sept. 30, 2010, at which time the SBA will make the determination of whether or not to extend the program.
DFP loans will be available for a minimum of $500,000 up to the $2 million allowable under the 7(a) program. With a maximum repayment term of five years, the loans will come with a 75% government guarantee. 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.
“We are committed to being the real partner small businesses need at this critical time,” Mills said. “Floorplan financing is just the latest tool in our toolbox to help small businesses in communities like Kokomo weather this recession and drive our nation’s economic recovery.”