NADA Praises SBA Action to Expand Loan Eligibility
WASHINGTON (May 1, 2009) - The following is a statement from John McEleney, chairman of the National Automobile Dealer Association, on the expansion of eligibility for a Small Business Administration loan guarantee program designed to help small businesses get access to working capital:
“By significantly expanding the SBA 7(a) loan guarantee program, the President along with SBA Administrator Karen Mills and her staff, have taken a significant step toward unlocking the frozen credit markets that are so critical to the success and continued operation of thousands of small, family-owned dealerships across the country. The newly expanded SBA 7(a) program 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, especially in these difficult economic times.
“NADA, which is encouraged that the SBA has expanded their loan-guarantee program, will continue to work with the Obama administration to lift the existing regulatory prohibition on vehicle inventory financing (floorplanning). Removing this constraint would enable lenders to make floorplan loans to those many small dealers currently finding it difficult to secure the funds they need to purchase new vehicle inventory.
“The nation's franchised auto dealers-both domestic and international-applaud the Administration for its actions and its understanding that, unless the dealer credit problem is fixed, any effort to revitalize the auto industry simply will not work.”
BACKGROUND: NADA Chairman John McEleney, members of NADA's executive committee and senior staff, along with leaders from the National Association of Minority Automobile Dealers (NAMAD), met several times with SBA since Nov. 2008 to advocate a more inclusive size standard for dealers seeking access to the 7(a) loan program. These meetings led to the SBA action, discussed above.
In the American Recovery and Reinvestment Act (ARRA), enacted earlier this year, Congress raised the ceiling on 7(a) loan guarantees to 90 percent and reduced or eliminated borrower fees. This has prompted an increase of 25-plus percent in loan volume and sparked the return of hundreds of lenders to the market. Together, the ARRA and the SBA's new size standard should enable more dealers to obtain working capital under the 7(a) loan program.
NADA is continuing to work with lenders to encourage them to make 7(a) loans to dealers and with the Obama administration to allow proceeds from these loans to be used for floorplan financing.