The U.S. Small Business Administration announced yesterday that beginning July 1, it will be offering government-guaranteed loans to finance titled inventory of eligible dealers. But there's a hefty borrowing minimum: $500,000.
The Dealer Floor Plan (DFP) pilot program will provide lines of credit that allow 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.
The SBA says it will provide loan guarantees for the lines of credit through its 7(a) program. 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.
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 percent 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.
“Floor plan 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 jobs these small businesses provide,” SBA administrator Karen Mills said in a press release posted on the association’s website.
The DFP program is the latest SBA initiative favoring small businesses. In early May, the administration temporarily amended the SBA 7(a) Business Loan Program to make it easier for businesses to qualify. The Motorcycle Industry Council decided to offer Dealernews readers access the MIC Technical Notice that addresses the SBA 7(a) loan program changes (usually the notices are for members only). Click here to download the notice.