Inventory Floor Planning Solutions

Archive for the ‘Dealership Financing’ Category

JAMIE LAREAU

AUTOMOTIVE NEWS

MAY 5, 2009 – 5:32 PM ET

DETROIT — GMAC Financial Services is extending through May a policy that allows dealers to avoid making certain payments on aging inventory.

GMAC had suspended dealers’ so-called curtailment payments in April.

“That’s one of our means to help alleviate stress on dealers while they also reduce their inventory on aging vehicles,” said Sue Mallino, a GMAC spokeswoman.

A curtailment is a payment dealers must make on old inventory. For new vehicles, the curtailment normally would be assessed on all 2007 and 2008 model vehicles that dealers have financed for more than 18 months. The curtailment also would cover used vehicles from 2007 and 2008 that dealers financed for more than six months.

“For aging inventory, we began to acquire a percentage of the financing to be paid down, and that’s what’s known as a curtailment,” Mallino said.

That percentage can be up to 10 percent of the vehicle’s outstanding balance. So if it’s a $10,000 car, a dealer might pay $1,000 a month for 10 months and pay it off, Mallino said. The time frame depends on how much financing is still owed.

Source: Automotive News

Technorati Tags: floor plan financing, Floorplan Financing, GMAC Financial Services

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.

Source: www.nada.org
Contacts:

David Hyatt
Vice President
NADA Public Affairs
(703) 821-7120
dhyatt@nada.org

Charles Cyrill
Director of Public Relations
NADA Public Affairs
(703) 821-7121
ccyrill@nada.org

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

MCCLEAN, Va. — John McEleney, chairman of the National Automobile Dealers Association, announced his support this week for recent changes to SBA 7(a), a Small Business Administration loan-guarantee program.

McEleney said an expansion of the program under the terms of the American Recovery and Reinvestment Act of 2009 will benefit dealers by providing an incentive for lenders to extend floorplanning lines of credit.

“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,” McEleney said. “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.”

The NADA has met with officials from the SBA and the Obama administration several times since last November, all in an effort to rally support for U.S. dealerships. Economic turmoil and frozen credit markets have resulted in record declines in new-car sales and put thousands of dealers out of business.

“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,” McEleney said.

Source: F&I management & Technology

Technorati Tags: floor plan financing, Floorplan Financing

ARLENA SAWYERS

AUTOMOTIVE NEWS

MAY 4, 2009 – 12:01 AM ET

Last November, Bob Cockerham closed his Suzuki dealership in Rio Rancho, N.M. Its new-vehicle sales had plunged 60 percent from the previous year.

In January, Wells Fargo Auto Finance, the floorplan lender for Cockerham’s Car World Kia dealership in Santa Fe, N.M., told him it was canceling his loan agreement. The bank said the dealership was losing too much money.

Things looked bleak. Then, in February, David Swanson rode to Cockerham’s rescue.

Swanson operates Save Your Car Dealership, a Seattle company specializing in crisis management for dealerships on the brink of losing their inventory financing. Swanson, a former dealer, reviewed the financials at Cockerham’s Kia store and went to work.

Under Swanson’s guidance, Cockerham slashed his advertising budget by about 70 percent, to $14,000 a month. By changing vendors, Cockerham cut his data processing costs in half, to $7,750 a month, and his telephone expenses by more than 40 percent, to $4,100 a month. He switched his sales managers, who previously earned a salary along with commission, to straight commission.

None of Swanson’s advice was rocket science, Cockerham concedes. He said he knew he needed to make deep cuts to survive, but could not bring himself to do it.

Survival manual

David Swanson, founder of Save Your Car Dealership, says dealers must take these steps to cope with a down market.

• Streamline spending
• Focus on used-vehicle sales
• Monitor financial statements for errors
• Communicate closely with lenders
• Follow through on tough changes

‘Terrifying experience’

“It’s a pretty terrifying experience,” Cockerham told Automotive News. “David takes the emotion out of it. He calmly comes in and says, ‘Here’s what we’re going to do.’ ”

Swanson said Wells Fargo is reviewing the dealership’s streamlined budget. Added Cockerham: “We’re close to putting another deal together. David’s done a great job of convincing them of our long-term viability.”

Swanson, 51, said his four-year-old company now works with about 35 dealerships. He said he has gotten lenders to restore floorplanning for about 60 percent of the 120 clients he has represented.

Often, Swanson said, his biggest challenge is persuading dealers that they need to change with a changing market. Lenders care about a dealership’s cash flow, capitalization, liquidity and liabilities, he said – not a dealer’s wishful thinking.

“Lenders don’t want to hear about a plan to sell more cars,” Swanson said. “The economy isn’t going to get better in the near future. I tell my dealers to cut costs to match the lousy economy. Lenders want to see blood on the floor.”

Swanson said he typically works with dealerships for six to eight months to ensure they follow through on the changes he advocates.

He charges $15,000 to $35,000 for his services, depending on the size of the dealership and the number of dealerships involved in a single restructuring. He says half of the fee is paid upfront. The rest is paid if he is successful in restoring floorplan financing.

If financing isn’t restored, dealers don’t pay the rest of the fee.

Leonard Wantz said he hired Swanson last fall when his Chevrolet dealership in Taneytown, Md., faced disaster. Floor traffic had dried up, as had the retail financing provided by a local bank. The dealership’s inventory lender, which Wantz declined to identify, threatened to cut off financing.

Slashing jobs, ad budget

Wantz and Swanson slashed the dealership’s head count by almost 40 percent, to 27 workers. They cut ad spending almost 60 percent, to about $5,000 a month. With those and other reductions in place, Wantz said, his floorplan lender agreed to maintain his credit line.

“After 44 years in business, I thought it was coming to an end,” Wantz said. “But when David got involved, he painted a whole different picture.”

Swanson said his clients benefit from his own mistakes as a dealer. From 1991 to 2002, he owned two Nissan dealerships, a Hyundai dealership and a Subaru dealership, all in the Seattle area.

Swanson said he bought too many stores, expanded too rapidly and soon became overextended. He invested some of the dealerships’ cash in tech stocks. When the tech bubble burst, he said, his working capital was “decimated.”

Said Swanson: “I was young and stupid.”

Source: Automotive News

NEIL ROLAND

AUTOMOTIVE NEWS

MAY 1, 2009 – 4:29 PM ET

NEW YORK — About 10,000 auto dealers and an untold number of suppliers will be eligible for federally backed loans of up to $2 million each under a new Obama administration program announced today.

The temporary Small Business Administration plan will loosen eligibility requirements for working-capital loans starting early next week, the agency said in a statement today. The loans for working capital typically are provided by small regional banks and guaranteed by the federal government.

Although only about 25 percent of the 19,000 U.S. auto dealers have been eligible for the assistance, that percentage will more than double under the new program, said John McEleney, chairman of the National Automobile Dealers Association.

“This means that thousands more dealers will be able to avoid layoffs, make payroll and keep employees,” he said in an interview.

The money can be used for daily operational expenses, McEleney said. The dealers group is trying to get more federal aid for floorplan loans, which can be used to purchase new cars from automakers, he said.

The new program will be in effect through September 2010, the SBA said. It will affect all small businesses, not just auto dealers and suppliers.

A spokesman for the Original Equipment Suppliers Association did not immediately respond to a request for comment.

The new eligibility requirements are based on net worth and net income rather than revenue.

To qualify, a dealer’s company and its affiliates must not exceed $8.5 million in net worth and $3 million in average annual net income after federal income taxes, excluding carryover losses, for the two preceding fiscal years.

SBA loans cannot be used to finance dealership floorplans. Dealers use floorplan loans to finance the purchase of new vehicles.

The typical floorplan loan is for $5 million. “Two million dollars is extremely helpful, but it’s not large enough to help a dealer’s floorplan,” Bailey Wood, NADA’s legislative director, told Automotive News yesterday. NADA is lobbying the federal government for more floorplan financing, Wood said.

Source: Automotive News

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

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

Credit is Available!

The tight credit market has left many car buyers worried about whether they will be able to finance their purchase. After all, more than 90 percent of new-car purchases are financed. While the current economic troubles have affected many sectors, consumers should know that credit is available in the automotive sales industry.

“It may be a tough time for business, but it’s a great time for consumers who have a stable job and solid credit scores,” said NADA’s 2009 chairman, John P. McEleney. “There are plenty of incentives that lower costs. Dealers can help find financing. And the quality of today’s vehicles is the best ever.”

Auto sales account for $690 billion of U.S. retail sales, which is about 20 percent of all retail sales in the country.

“Most people have heard the expression, ‘All politics is local.’ The same is true of credit. All credit is local,” McEleney said. “The fact is local dealers have access to multiple sources of financing, including many community banks and credit unions that have plenty of money to lend.”

Source www.NADA.org

Technorati Tags: Auto Loans, Credit, Financing