NADA Applauds New Government-Backed Pilot Program That Allows Dealer Floorplan Loans

KOKOMO, Ind., May 28, 2009 After a number of meetings between the National Automobile Dealers Association and the Obama administration in which NADA urged for greater access to floorplan loans, the Small Business Administration announced today it's launching a pilot program that will -- for the first time -- provide eligible dealers with government-backed lines of credit to finance their vehicle inventory.

NADA praised the SBA for its efforts to expand its 7(a) loan guarantee program to include wholesale inventory also known as floorplan loans, since many auto dealers are currently struggling to survive without access to credit to purchase vehicles for their lots. The pilot program begins July 1, 2009 and runs through Sept. 30, 2010, at which time SBA will consider extending the program.

"The success and continued operation of thousands of small, family-owned auto dealerships across the country is directly connected to their ability to purchase both new and used vehicles to offer their customers," said John Lyboldt, NADA vice president of dealership operations. "The nation's dealers -- both domestic and international -- applaud the President, SBA Administrator Karen Mills and her staff for understanding that any effort to revitalize the auto industry simply will not work until dealer credit issues are resolved."

The SBA pilot program will provide a guarantee up to 75 percent for as much as a $2 million loan for floorplan financing. Today's announcement effectively sets aside an outdated prohibition on the use of 7(a) loan guarantees for floorplan financing. Many smaller dealers are expected to work with lenders to take advantage of this for their new- and used-vehicle inventory.

In the past year, Lyboldt noted that many banks have exited the inventory financing business and others are not willing to pick up new dealers. In some cases, this has forced dealerships to close their doors. To address this downward trend, NADA has been working closely with the Obama administration, including SBA, Treasury and the Federal Reserve, in an effort to thaw dysfunctional credit markets for a major retail sector of the economy -- auto sales.

"Nearly 20 percent of all retail purchases are new cars and trucks, so expanding access to credit for dealers will not only help revive the struggling auto industry but aid the overall economy as well," Lyboldt added. "Today's announcement coupled with the expansion of the size standards of the program announced by the SBA earlier this month will help give dealers access to the funds they need to keep their businesses running in during these trying economic times."