Inventory Floor Planning Solutions

Archive for April, 2009

NEIL ROLAND
AUTOMOTIVE NEWS
APRIL 27, 2009 – 12:01 AM ET

WASHINGTON — The Obama administration is exploring ways to expand financing to car dealers, the head of the National Automobile Dealers Association said Friday. NADA Chairman John McEleney said members of the auto task force told him they are trying to find ways to let dealers borrow money to buy new cars from manufacturers.

One option the task force is looking at is working with the Small Business Administration, said McEleney, who met with task force adviser Ron Bloom and others on Thursday, April 23. “The task force wants that to happen, and they’re trying to find avenues, including through SBA,” McEleney said in an interview.

NADA did not request a specific figure, he said.

Source: Automotive News

Technorati Tags: floor plan financing, Floorplan Financing, John McEleney, SBA

NEIL ROLAND
AUTOMOTIVE NEWS
APRIL 24, 2009 – 3:39 PM ET

WASHINGTON — The Obama administration is exploring ways to expand financing to car dealers, the head of the National Automobile Dealers Association said today.

NADA Chairman John McEleney said members of the auto task force told him they are trying to find ways to let dealers borrow money to buy new cars from manufacturers.

One option the task force is looking at is working with the Small Business Administration, said McEleney, who met with task force adviser Ron Bloom and others yesterday.

“The task force wants that to happen, and they’re trying to find avenues, including through SBA,” McEleney said in an interview.

The dealers group did not request a specific figure, nor did the task force offer one, he said. Task force members did not commit to providing aid or specify a deadline by which they would decide, McEleney said.

The SBA confirmed that the agency is looking into expanding aid to automakers.

“We are looking seriously at whether there can be changes in the program and considering making changes that would allow the loans that NADA is seeking,” said SBA spokesman Mike Stamler.

A White House spokeswoman did not immediately respond to a request for comment.

SBA guidelines limit aid eligibility to dealers with less than about $29 million in annual revenue, Stamler said. An average dealer’s revenue is about $40 million to $45 million, McEleney said.

Dealers typically obtain floorplan loans from captive finance companies, national and regional banks, and credit unions. The lenders obtain their capital from a variety of sources, including securitized loans.

NADA has unsuccessfully sought assistance from the administration’s Term Asset-Backed Loan Facility, which provides backing for consumer and small-business loans.

TALF funds AAA-rated securitizations, in which loans are bundled and sold to institutional investors and financial institutions. But floorplan securitizations, in which lenders bundle dealer loans into asset-backed securities, are rated below investment grade.

General Motors has prepared plans to reduce the number of dealers to 4,100 from 6,200 by 2014.

About 900 U.S. dealers went out of business last year, leaving around 19,000 today. McEleney estimated that 1,200 will go out of business this year.

Source: Automotive News

Technorati Tags: floor plan financing, Floorplan Financing, National Automobile Dealers Association, SBA

By Kimberly Johnson
AP Auto Writer
(AP) — A national auto dealers group said Thursday that President Obama’s auto task force is considering extending loans usually reserved for small businesses to dealers, making it easier for them to borrow money to acquire showroom vehicles.

According to the National Automobile Dealers Association, which met with the task force Thursday morning, the government is considering ways to help dealers access money to buy cars to stock their lots. Frozen credit markets have yet to thaw since banks received TARP aid, said NADA chairman John McEleney, causing dealers continued difficulty in acquiring loans and staying afloat.

“There are a lot of departments of government involved, but the task force agrees with dealers that credit is a significant problem,” he said. “They wanted to know if we were seeing improvement in credit and dealer financing. We’re seeing some on the retail side but we still need help with floor plan loans.”

Most dealerships do not qualify for the typical loans from the Small Business Administration, because they have gross receipts of more than $29 million, including sales of cars, service and parts.

“One of suggestions we made to the task force was to go to an employee-based size standard,” said Andrew Koblenz, vice president of legal and regulatory affairs for NADA. “The mechanism they choose doesn’t account for the fact that cars have gotten more expensive over time, but the returns don’t get larger.”

SBA spokesman Mike Stamler said administrator Karen G. Mills indicated during her confirmation hearing earlier this month that the agency would look “seriously” at expanding SBA lending to cover auto dealers. Stamler said there was no timetable yet for implementing such a plan and no details were available, but noted that the SBA used a similar temporary program to help dealers in the late 1970s.

The task force also wanted to know how employees would be affected should one of the automakers file for bankruptcy, NADA VP Koblenz said. Nearly 500,000 are employed at GM and Chrysler dealerships nationwide. A government accountability report on the auto restructuring plans released Thursday said that more than 900 dealers closed in the past year and that dealer employment was down.

A typical dealership employs about 55 people, including technicians. Under current rules, only about 15 percent of dealers, with fewer than 30 workers, would be eligible for a loan, McEleney noted.

“While they wouldn’t all be out of jobs, a lot of them would be,” McEleney said. “They asked if it would have a devastating effect on employment across the country.”

Crain’s Detroit Bussiness

Technorati Tags: National Automobile Dealers Association, Small Business Administration

NADA Pushes to Jumpstart Floorplanning Securitization Under TALF

Updates Added March 30, 2009

Background

• Dealers rely on floorplan financing to buy vehicles from the manufacturers. The average floorplan loan for a dealer is $4.9 million, and dealers collectively hold approximately $100 billion in floorplanned inventory.

• These floorplan loans are obtained from a variety of sources: captive finance companies, national banks, regional banks, credit unions, etc.

• In order to extend this credit, the floorplan lenders need capital, and they obtain it from a variety of sources as well.

• One key source of capital for the floorplan lenders is the floorplan securitization market.  To access capital through this market, floorplan lenders bundle dealer floorplan loans together into what are called asset-backed securities (or ABSs) and then sell these ABSs to institutional investors.

The Problem

• Until last fall, the floorplan securitization market was operating quite well, providing very efficiently priced capital for floorplan lenders.  Floorplan securitizations were good investments and attracted a lot of buyers.  In fact, floorplan securitizations were generally rated AAA.

• However, when the liquidity crisis hit, the floorplan securitization market froze up just like a lot of other credit markets.  Institutional investors stopped buying floorplan securitizations or offered to buy them only at prices at which the floorplan lenders could not afford to sell.

• This caused many floorplan lenders to run out of the cash they needed both to extend new floorplan financings and to roll over existing floorplan financings, which, in turn, contributed significantly to the distress that many dealers are now facing.

The TALF

• The TALF is an effort to address this problem.

• TALF stands for “Term Asset-backed securities Loan Facility.”

• The TALF is a $200 billion to $1 trillion dollar credit program designed to facilitate the issuance and sale of a variety of ABSs, including three of great importance to dealers.
(more)
• The TALF will work by providing liquidity to the buyers and sellers of ABSs.

• The ABS asset classes included within the TALF that are of importance to dealers are as follows:

o Securities backed by SBA guaranteed loans – these are ABSs that provide capital to banks who make working capital loans to small businesses like dealerships.

o Securities backed by retail auto financings – these are ABSs that provide capital to lenders who extend credit to consumers who buy cars.

o Securities backed by retail auto leases – these are ABSs that provide capital to lenders who lease cars to consumers.

o Securities backed by dealer floorplan loans – these are ABSs that provide capital to lenders who make loans to auto dealers for their inventory financing.

• The Treasury Department announced on November 25, 2008 that the Federal Reserve Board would be establishing the TALF.  At the time the TALF was announced, it expressly extended to both securities back by SBA guaranteed loans and securities backed by retail auto financings.  However, it was unclear at that time whether the TALF would also include securities backed by auto dealer floorplan loans. That uncertainty was removed on Dec. 19 when the Federal Reserve Board confirmed that auto floorplan securitizations would be eligible for the TALF.

• It is important to note that the TALF is not a source to which dealers can apply to obtain floorplan loans directly.

• Nonetheless, it is hoped that the TALF will give dealers significant help by reopening the floorplan securitization market and thereby providing capital to the traditional floorplan lenders who will then have the resources they need to once again extend floorplan financing to dealers.

• The TALF began funding securitizations on March 25, 2009. Unfortunately, because the funding is limited to AAA-rated securitizations and many dealer floorplan securitizations were recently downgraded below AAA, the initial funding of the TALF is not expected to significantly enhance the availability of credit for floorplan loans. Nevertheless, the initial funding is assisting in the availability of retail auto credit. Moreover, the FRB could modify the eligibility criteria for floorplan securitizations in subsequent fundings of the TALF, and NADA and many finance sources are working tirelessly to ensure that those eligibility criteria changes are made as soon as possible.

© National Automobile Dealers Association
March 2009

Technorati Tags: Asset-backed security, TALF, Term Asset-Backed Securities Loan Facility

Treasury Says Lending Has Fallen Among Banks Getting Government Aid

By MICHAEL R. CRITTENDEN and DAVID ENRICH

The largest bank recipients of U.S. government aid are offering less credit to businesses and consumers, the Treasury Department said Wednesday, reflecting and exacerbating the tenuous state of the current economic environment.

In a monthly snapshot of lending by the 21 largest banks receiving Troubled Asset Relief Program funds, the Treasury said credit being offered fell 2.2% across all commercial-lending and consumer-lending categories in February, compared with the prior month.

Particularly problematic: continued deterioration in commercial real estate and general business lending, as well as the credit being made available for student and auto loans.

The lone bright spot remained home loans, with consumers eager to take advantage of record-low interest rates to refinance their mortgages. (Please see related article.)

The Treasury said 16 of the 18 banks surveyed increased mortgage originations in February, resulting in a 35% increase in mortgage lending from January levels.

The February decline in lending adds to pressure on the Obama administration’s efforts to restart the still-fragile credit markets.

The Treasury has committed $95 billion in TARP funds for new programs to boost consumer and business lending, though they are either just getting started or are still in the development phase.

The report suggests that jawboning by federal officials for banks to use TARP funds to boost lending is having a limited effect.

The Treasury blamed the decrease on the broader economic weakness, including low consumer confidence, high unemployment and a decrease in U.S. exports.

It also said lending would have been lower absent the nearly $200 billion in capital injections the government has provided to about 550 banks.

Banks’ diminished appetites for lending are forcing businesses and consumers alike to curb their spending, which risks prolonging the U.S. economic recession.

Demanding New Collateral

Dan Carl, who owns a handful of businesses including several car dealerships in Michigan, said Fifth Third Bancorp, Cincinnati, refused to renew some of his company’s credit lines when they came due earlier this month. On other loans, Fifth Third raised interest rates and demanded Mr. Carl’s firm put up additional collateral.

The lack of affordable credit was one factor prompting Mr. Carl’s company to recently lay off 20% of the work force and close at least one dealership.

Lenders such as Fifth Third are punishing “the good customers to make up for the banks’ mistakes,” he said.

Fifth Third received $3.45 billion through TARP.

It made $634 million of new commercial and industrial loans in February, down from $785 million in January and $1.3 billion in December, according to the bank’s filing with the Treasury Department.

“Demand for Small Business credit is still relatively stable but showing signs of weakening as application volume is starting to slow,” Fifth Third said in its filing.

Fifth Third’s Response

Fifth Third spokeswoman Stephanie Honan said the bank won’t comment on specific customers.

In reviewing loans, she said, Fifth Third considers overall economic conditions and “any changes to the customer’s business environment.”

Overall, she said, the bank tries “to balance our commitment to our customers with safe and responsible lending practices.”

The banking industry’s lending pullback was particularly severe with consumer credit.

In February, according to the Treasury report, originations of new U.S. credit-card accounts fell 2.7%.

That number likely understates the magnitude of the retrenchment. Many banks have been slashing borrowing limits on cards, especially for customers who rarely approach their limits.

By reducing the credit lines, the banks can free up space on their balance sheets. But the move risks infuriating consumers.

Bank of America Corp., which received $45 billion through TARP and has the industry’s largest U.S. card portfolio, said in its submission to the Treasury that credit-card loan balances and new account originations declined in February “due to continued reduction of exposure on long term inactive customers and line reductions on high risk accounts.”

Bank of America recently informed longtime customer James S. Jensen that the interest rate on his credit card would leap into the double-digits, even though he had never been late on a payment.

Canceling His Account

“I could borrow on the street for less than this,” says Mr. Jensen, a 61-year-old vice president at Navistar Truck Group in Warrenville, Ill.

Mr. Jensen says he is canceling his Bank of America card as a result.

Bank of America spokeswoman Betty Riess said the Charlotte, N.C., bank is “taking a more aggressive look at accounts to control risk given the current environment.”

Write to David Enrich at david.enrich@wsj.com

Source www.online.wsj.com

Technorati Tags: Bank of America, Troubled Asset Relief Program

J.D. Power and Associates is working with F&I magazine to seek feedback from dealer principals for its 2009 Dealer Financing Satisfaction Study, which allows dealers to evaluate lender performances in prime retail credit, subprime retail credit, floor planning and retail leasing.

First published in 1994, the annual study has been a platform for dealers to provide feedback on lenders and their services. Dealers have the opportunity to share what is most important to their dealership and how lenders, including captives, banks, independent providers and credit unions, are performing.

Dealers will provide in-depth evaluations of their key finance providers, based on volume of business, and all aspects of that relationship. Dealers will also rate the importance of full-spectrum lending and provide insights on the relationship between selection of a provider for floor planning and retail financing.

For each survey completed, J.D. Power and Associates will contribute $2 to a charity of that dealer’s choice from a list of six options.

Based on the study’s results, J.D. Power and Associates will rank lenders in four segments: prime retail credit, subprime retail credit, retail leasing and floor planning. Finance providers must be evaluated by at least 50 dealer respondents in order to be eligible for award consideration.

Deadline to participate in the J.D. Power and Associates 2009 Dealer Financing Satisfaction Study is May 8, 2009. To participate, click here, or visit www.jdpowersurveys.com/dealerstudy.

Source: www.fi-magazine.com

Technorati Tags: J. D. Power and Associates, Loan, Subprime lending

Contact Your U.S. Senators and Urge Them to Support
Small Business Administration (SBA) Loans
for RV Floorplan Loans

Click Here for a Sample Letter

RV dealers and their volunteer leaders agree: the number one issue facing the RV industry is financing.   The Obama Administration must turn its attention on the severe impact of the credit crisis on RV dealers and the urgent need for floorplan credit.  Without retail credit and floorplan loans, even well-capitalized dealers can be out of business.  Preserving floorplan lending is essential to keeping dealers in business and purchasing new RVs. The RV industry will not recover until the retail credit and floorplan problem is fixed.

RVDA is urging the President and Congress to support the following policy recommendations.  These recommendations also have the support of the National Automobile Dealers Association (NADA).

1. Expand access to Small Business Administration (SBA) lending capacity for dealers.  The Administration has the statutory authority to expand the SBA size standard that today excludes many dealers.  Also, the Administration has the statutory authority to allow SBA’s guarantee program to be used for floorplan loans that currently are ineligible under the program. An emergency directive implementing these two changes would increase access to credit for small business dealers all across the country.

2. Restore liquidity for RV retail and floorplan lenders. Work with the Federal Reserve Board to make sure that the Term Asset-backed Securities Loan Facility (TALF) injects essential liquidity by revitalizing securitization of RV retail and floorplan loans. If TALF is too cumbersome to meet this objective in the short term, then create another mechanism to restore lending in these areas. Time is of the essence.

President Obama’s pick for the SBA’s new administrator, Karen Mills, told Senators at her confirmation hearing that she “would be very interested” to look at the SBA floorplan loan policy “quickly and see what the possibilities are to help.” It’s time to urge the Administration and Congress to transfer those words into action.

Please contact your U.S. Senators and urge them to support changes in SBA loan policies that can help RV dealers.

To contact your U.S. Senators click here.

RVDA will post regular updates and more information at www.rvda.org. Thanks for your support.

Mike Molino, CAE
President, RVDA

Technorati Tags: Floorplan Financing, Floorplan Loans, National Automobile Dealers Association, SBA, Small Business Administration

Technorati Tags: CarGurus, Facebook, Facebook Connect, MySpace, Social network, Social network service, TwitPic, Yahoo

By Cam Fine: www.icba.org

“I fear all we have done is to awaken a sleeping giant and fill him with a terrible resolve.”

Japanese Admiral Isoroku Yamamoto—upon learning that the Japanese Declaration of War had not been delivered prior to the bombing of Pearl Harbor.

One of the most devastating events in American military history was Japan’s sneak attack on Pearl Harbor. Metaphorically, that is exactly what the FDIC did on Friday, February 27, by imposing a crippling 20-cent special assessment (with the possibility of greater assessments on the horizon) on the nation’s 8,000 community banks. This staggering burden is directly related to the greed, incompetence and sins of the Wall Street firms that so crippled this nation’s economy.

We have now come to the point where the “systemically unimportant” banks of Main Street must, along with the nation’s taxpayers, bail out the “systemically important” Wall Street firms. Not only are a handful of Wall Street CEOs holding a gun to the taxpayers’ heads, they have the banks of Main Street America looking down the barrel as well.

Why are thousands of Main Street community banks being crippled by a handful of Wall Street firms? Doesn’t our government “get it”? Do public officials get that they are punishing the only financial institutions that can pull them out of this hole? Will Rogers famously said, “When you find yourself in a hole, quit digging.” The FDIC has not stopped digging and Main Street America is getting deeper in the hole.

The very banks capable of dragging this country out of our economic turmoil, the banks that are doing all they can to give Main Street and rural America a hand up, got the back of the hand from their own government on the same day that Citi was getting a hand out! And yesterday AIG got another $30 billion helping of taxpayer money.

Complete Article www.icba.org.

Technorati Tags: Banking, ICBA

I just finished reading this at www.businessweek.com, while I like the Prosper.com idea the risk of unsecured lending to strangers seems to great for the private investor. We believe investors should focus on their local communities and reduce risk by holding title to physical collateral, that is what floor plan financing is all about.

Excerpt,

Once seen as the future of financing for entrepreneurs, the social-networking approach has suffered from high defaults

By Amy Barrett

It has been a year of setbacks for peer-to-peer lenders such as Prosper, Lending Club, and Zopa, which use the Web to connect those who need a loan with individuals willing to act as lenders. Once positioned to become an alternative financing spigot for entrepreneurs, the nascent industry has been hit by regulatory issues, a slow economy, and a slew of defaults.

Read the full story here www.businessweek.com

Technorati Tags: entrepreneurs, Financing, Peer to Peer Lending, Prosper