Posts Tagged ‘Inventory Financing’

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

Lender also restores retail financing to subprime customers

Donna Harris
Automotive News
April 1, 2009 – 10:16 am ET
UPDATED: 4/1/09 12:39 p.m. ET

In a sharp reversal, GMAC Financial Services said today that it has backed off a tough new inventory repayment policy on aging new vehicles and has agreed to resume subprime lending.

GMAC also said it is pumping $5 billion more into consumer auto loans over the next 60 days.

The initiatives are designed to boost auto sales and help keep struggling dealers afloat, said GMAC President Bill Muir.

“Dealers have told us that cash flow is critical right now,” Muir said in a statement. “We want to do everything possible to help dealers sell their inventory of cars and trucks, while preserving their working capital during the next couple of months.”

Eliminating dealer curtailments

GMAC said it immediately will eliminate all dealer curtailment payments for older new-vehicle inventory during April. Curtailment is a standard industry practice accelerating the payoff of inventory in stock for an extended period.

In January, GMAC said it would increase the amount it charged dealers to keep some aging new vehicles on their lots. The accelerated payment schedule began in March and applied to new vehicles with model years of 2007 or older and new 2008 vehicles financed before Sept. 1, 2007.

GMAC also is waiving fees it charged dealers to post older vehicles on SmartAuction, GMAC’s online remarketing site, through June. The waiver is designed to help dealers clear their lots of older vehicles.

And the company is letting some dealers postpone interest charges on inventory financing for two 30-day periods over the next 120 days. Dealers can start the deferral program beginning with their interest bill for March. The payment for deferred interest will be due 90 days after the month the charges are postponed.

The program “can be a significant temporary boost to cash flow,” Muir said. “Our goal is to ease the burden on dealers over the next few months as they work hard to lower costs, reduce inventory and protect their financial stability.”

Return to subprime

GMAC is getting back into subprime lending, agreeing to extend credit to retail customers with credit scores below 620 — on a limited basis. These customers still will need to qualify for financing, GMAC said in its announcement. It did not specify those requirements.

In October, GMAC introduced a minimum credit score of 700. After receiving federal aid in January, the lender lowered the minimum score to 620, the conventional cutoff below which customers are considered to have risky credit. But the company announced it would shut down its subprime subsidiary, Nuvell Financial Services.

GMAC also is increasing advance rates for car loans with terms of 60 months or fewer. The advance rate is the amount lenders are willing to lend, often expressed as a percentage of the vehicle’s sticker price.

The company said nothing about auto leasing in its announcement. Dealers have said GMAC’s withdrawal from leasing has substantially hindered auto sales.

“GMAC now finances a broad spectrum of auto buyers,” Muir said. “Through March, we financed over $2 billion in new and used retail auto contracts. We want to do our part to support the U.S. auto industry and individuals in the market for a car or truck.”

In December GMAC received a $6 billion government bailout that required GM and the private equity firm Cerberus Capital Management LP to slash their stakes in GMAC. GM’s stake was 49 percent and Cerberus’ 51 percent.

GMAC, now a bank holding company with operations in North America, South America, Europe and the Asia-Pacific region, had $189 billion in assets on Dec. 31.

Reuters contributed to this report

All I can Add, It’s about time…

Technorati Tags: floor plan financing, Floorplan Financing, GMAC, Inventory Financing

Who is Dealers First?

Dealers First Financial, Inc.

Dealers First Financial was founded in 1998 to provide floor plan financing to independent car dealers in western North Carolina and upstate South Carolina.  There was no software that could be purchased to manage the new company, so the company developed proprietary systems to manage its floor plan financing operation.  Thus, the system is a culmination of 11 years of development and active use, having completed almost 40,000 vehicle transactions.

Several years ago, we came to the conclusion that there was still no adequate software available.   Further enhancements to our system, enabled the software to be web-based and accessible to the floor planner and its individual dealers. This level of accessibility distinguishes this program apart from potential competition.  This web interaction minimizes mundane tasks and allows the dealer/customer to access his account information as to best manage its inventory and its relationship with the floor plan company.

Dealers First Affiliates, Inc.

Dealers First Affiliates licenses a software product named Tirekicker ™ but more importantly provides training, education and consulting to floor plan financing operations.

Dealers First Affiliates was created in 2008 in order to make its software product, Tirekicker ™, and consulting services available to other lending institutions and Individual Investors.  This entity currently services a profitable business providing a unique and valuable service in its community.

Technorati Tags: floor plan financing, Inventory Financing