Inventory Floor Planning Solutions

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KOKOMO, IND. – The U.S. Small Business Administration will offer government guaranteed loans to finance inventory for eligible auto, recreational vehicle, boat and other dealerships under a new pilot program announced today by SBA Administrator Karen Mills.

Dealer Floor Plan (DFP) financing will be available beginning July 1, according to Mills. She announced the new program during a visit to Kokomo, Ind., with Dr. Ed Montgomery, President Barack Obama’s Director of Recovery for Auto Communities and Workers.

“Countless small businesses, including dealerships, across the country are facing significant challenges as a result of the uncertainty in the auto industry,” Mills said. “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 the jobs these small businesses provide.”

Mills and Montgomery discussed the new DFP pilot program, as well as other resources offered by SBA and the federal government to help small businesses in communities impacted by the troubles facing the auto industry.

“Small businesses are the engine of our economic growth,” Dr. Montgomery said. “We are committed to finding ways the federal government can cut through red tape and get resources to these companies quickly during these tough economic times. From supporting nearly $4 billion in lending to small businesses across the country since February to the Dealer Floor Plan financing announced today, the SBA is making the resources provided in the Recovery Act accessible and working to provided needed credit. The President is committed to continuing to work with federal officials to identify resources like these that make a real difference in the lives of our auto communities and workers.”

Floor plan financing is a line of credit that allows 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.

Under the DFP pilot program, the SBA will provide loan guarantees for lines of credit through its 7(a) program. DFP loans will be made through SBA lenders only for titleable inventory, including autos, RVs, manufactured homes, boats and motorcycles. The pilot program will begin July 1 and will be available through Sept. 30, 2010, at which time the SBA will make the determination of whether or not to extend the program.

DFP 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.

During a roundtable discussion later in the afternoon with local small business owners Mills provided information on other SBA loan programs and benefits provided by the Recovery Act. Specifically, small business owners can take advantage of higher government guarantees on some 7(a) loans, as well as reduced fees on both 7(a) and 504 loans. The agency is also providing more tools to help small businesses compete for federal government contracts, along with technical assistance and counseling for business owners and entrepreneurs to help them deal with the economic challenges they face.

“We are committed to being the real partner small businesses need at this critical time,” Mills said. “Floor plan financing is just the latest tool in our toolbox to help small businesses in communities like Kokomo weather this recession and drive our nation’s economic recovery.”

Documents:

dfp_fact_sheet

dfp_faqs

dfp_pressrelease_052809

Technorati Tags: floor plan financing, Floorplan Financing, Inventory Financing, SBA, Small Business Administration

The Federal Reserve Board’s April 2009 Senior Loan Officer Opinion Survey on Banking Practices was released on 5/04/2009. The report addressed changes in the supply of, and demand for, loans to businesses and households over the previous three months. The survey also included two sets of special questions: The first set asked banks about their expectations for delinquencies and charge-offs on existing loans to business and households; the second set queried banks about international trade finance. This article is based on responses from 53 domestic banks and 23 U.S. branches and agencies of foreign banks.

Click here to read The Full Report

Source: http://federalreserve.gov/

Technorati Tags: Banks and Institutions, Federal Reserve System

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

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

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