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WASHINGTON – The nominee to head the Small Business Administration promised Wednesday to see what she can do to 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 buy the cars, trucks and recreational vehicles for their showroom floors.
Asked last week what was being done to help dealers get financing, Treasury Secretary Timothy 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 Wednesday, 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 vehicles’ manufacturer or a bank.
But with tightened credit, those loans have dried up. Under current rules, vehicle inventory financing – called “floorplans” – is not eligible for SBA loans.
“These people are hurting. The president came to Elkhart wanting to help,” Bayh told Mills, referring to President Obama’s February trip to the economically hard-hit county where one in five people is without a job because of layoffs in the RV manufacturing industry.
“This is one way to provide real relief to these people,” Bayh said.
He asked whether 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.”
In many cases, RV dealers have been able to help buyers get loans through a credit union or other source, said Kevin Broom, a spokesman for the RV trade association.
But as those vehicles are sold, the dealers can’t get loans to buy more. That means they place fewer orders with the manufacturers, he said. Fewer orders leads to layoffs for the manufacturers.
Nearly half of all employees in the RV industry, which is centered in Elkhart County, have lost their jobs. Elkhart County’s 18 percent unemployment rate 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 finding a way to extend credit to dealerships “is essential not only to a healthy automotive industry but to the overall economic recovery.”
