The nominee to head the Small Business Administration promised today (April 1) to see what she can do provide loans to RV and car dealers to pay for their inventories.
The pledge from Karen Mills nudges the Obama administration’s position closer to what the RV and auto dealers have said is their top priority: easing credit so dealers can purchase the cars, trucks and RVs for their showroom floors, according to the Fort Wayne (Ind.) Journal Gazette.
Asked last week what was being done to help dealers get financing, Treasury Secretary Tim Geithner was less specific. “We’re working on it,” he told a Senate committee. “We think it would be helpful as a part of the overall solution, and I’d certainly be able to tell you and your colleagues in the next couple days what we think is possible, what’s not possible.”
One thing that should be possible, Sen. Evan Bayh, D-Ind., said at Mills’ confirmation hearing, is for dealers to be eligible for SBA loans to finance their inventories. Car and RV dealers must pay the manufacturers when they order a vehicle, not when it is sold. Dealers usually finance the inventory through the financial arm of their manufacturer or a bank. But with tightened credit, those loans have dried up. Under current rules, those vehicle inventory financing – called “floorplans” – are not eligible for SBA loans.
“These people are hurting. The president came to Elkhart wanting to help,” Bayh told Mills. “This is one way to provide real relief to these people.”
He asked if she would support making SBA loans eligible for purchasing inventory. Mills said she “would be very interested to look at that quickly and see what the possibilities are to help.”
Nearly half of all employees in the entire RV industry, which is centered in Elkhart County, have lost their jobs. Elkhart County’s 18% unemployment is the highest in the nation.
The auto dealers’ trade association has said that easing credit for stocking their dealerships is the most important issue facing the retail side of the car, truck and RV industries. John McEleney, chairman of the National Automobile Dealers Association, issued a statement that “vehicle inventory financing is the building block to automaker viability. It affects the entire auto retail network, domestic and international.” He said that finding a way to extend credit to dealerships “is essential not only to a healthy automotive industry, but to the overall economic recovery.”