WASHINGTON – More midsize RV and vehicle dealers and auto industry suppliers can apply for federal loans to help pay for payroll, supplies and other costs, the Obama administration announced Friday.
The Small Business Administration said it would temporarily expand its size limit for eligible businesses, making many dealers and suppliers eligible.
But the rules change does not lift the prohibition against using the government-backed loans to help dealers pay for inventory, the SBA said.
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. SBA rules specifically prohibit SBA loans from being used for vehicle inventory financing, called “floorplans.”
During her confirmation hearing, SBA Administrator Karen Mills promised to review how the agency could help RV and auto dealers with their floorplan loans. Agency spokesman Jonathan Swain said that is still under study.
The loans will be available early next week through Sept. 30, the agency said.
The five-month change will allow companies with a net worth of up to $8.5 million and annual net profit of $3 million to receive the government-backed loans.
“This will help unlock financing both for consumers who want to buy cars and dealers who want to provide them,” said Brian Deese, an Obama administration economic adviser.
John McEleney, chairman of the National Automobile Dealer Association, said the rules change will open the SBA loans to about 4,700 auto dealers. The RV Dealers Association said at least 750 additional RV dealerships would be eligible under the relaxed rules.
McEleney said the change “should encourage lenders to assist thousands of additional dealers with the liquidity they need to keep their doors open, make payroll and prevent further layoffs.”
He hopes the SBA will also relax the rules about floorplan loans.
Nearly half of all employees in the RV industry, which is centered in Elkhart County, have lost jobs. The Elkhart-Goshen unemployment rate of 18.8 percent is one of the highest in the nation.
Rep. Mark Souder, R-3rd, and Sen. Evan Bayh, D-Ind., applauded the change. Souder said it “will finally begin to fill the gap in our economic recovery efforts.”
Bayh said it will “provide a lifeline to Indiana’s auto dealers, parts suppliers and RV manufacturers.”
