Auto, RV and other dealerships can now apply for SBA-guaranteed Dealer Floor Plan (DFP) loans, which will give these small businesses easier access to loans secured by their inventory, helping them increase their cash flow.
This new pilot program is one of many tools the SBA is providing to help small businesses get better access to capital and technical assistance, and complements other steps already taken under the Recovery Act to help small businesses. “In recent months, we have seen a dramatic decline in the availability of loans to small businesses at this critical time.
“Small Business Inventory is committed to partnering with small businesses to help them have the resources they need to stay in business, preserve jobs, and weather these tough economic times,” said SBA Administrator Karen G. Mills.
Floor Plan Financing is a revolving line of credit that allows dealers to finance inventory that can be titled through the SBA's 7(a) program, such as cars, RVs, manufactured homes, boats, trailers, etc. As the dealer sells each collateral item, the loan advance on that collateral is repaid. Once the loan is repaid, the dealer can borrow against the line of credit to add new inventory.
The DFP Pilot Program will run until September 30, 2010, after which the SBA will decide whether to extend it further. DFP loans can be made by any lender that already participates in an SBA loan program. Lenders that are not already participating in an SBA loan program can become SBA-approved lenders if they are interested in offering DFP loans.
Because the DFP Pilot Program is a new effort to provide insurance for specialized products, the SBA is working with and training lenders who may be interested in offering this type of loan, and the SBA expects these lenders to have a lead time.
DFP loans are available for a minimum of $500,000 and up to $2 million allowed under the 7(a) program. Repayment terms are up to five years and are backed by a government guarantee of 60 to 75 percent, depending on the type of collateral and the lender's advance percentage relative to the wholesale value of the inventory. Borrowers can also benefit from a temporary waiver of fees on 7(a) loans made possible by the American Recovery and Reinvestment Act of 2009.
Borrowers interested in obtaining a DFP loan should contact a lender in their area or the nearest SBA field office to obtain a list of SBA-certified lenders that may participate in the program. Local field offices and contact information are available on the SBA website at www.sba.gov/localresources/index.html.