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Obama signs bill to lift limits to $5 million on U.S.-backed dealer loans

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Obama signs bill to lift limits to $5 million on U.S.-backed dealer loans

Neil Roland

Automotive News -- September 27, 2010 - 2:35 pm ET

WASHINGTON -- President Obama today signed legislation that will raise limits to $5 million on federally guaranteed loans available to thousands of small auto dealers as the administration attempts to loosen credit in a sputtering economy.

The previous floorplan financing limit in the U.S. Small Business Administration pilot program was $2 million.

The 17-month-old program hasn't gotten off the ground because banks, credit unions and other lenders have been reluctant to participate.

The Obama-backed bill, which contained provisions aimed at creating jobs as well as easing credit, passed the House and Senate over almost completely unified Republican opposition as the Nov. 2 congressional elections approach.

"We still need banks to lend," said Bailey Wood, spokesman for the National Automobile Dealers Association. "The fact is, many credit worthy dealers are still having a tough time getting the credit they need to purchase vehicle inventory."

More help for small business

The floorplan financing provision is part of a section that will raise loan limits for all qualified small businesses.

The new law will increase the portion of each loan that is backed by the federal government to 90 percent from 75 percent.

It also waives lender fees to the government of as much as $54,000 on a $2 million loan, SBA spokesman Michael Stamler said. These fees can be passed on to dealers.

More than half the 18,000 dealerships in the United States will qualify as small businesses for the floorplan financing assistance, Wood said.

To qualify, dealerships must have average net income of less than $3 million after taxes and tangible net worth of $8.5 million or less, he said. Only 61 SBA-backed floorplan loans totaling $61 million have been approved for dealerships, Stamler said.

Lenders have cited government red tape and fees, their own staffing constraints and lack of familiarity with floorplan financing.

The SBA program, which began in May 2009, will expire in September 2013 under the new law.

Read more: http://www.autonews.com/apps/pbcs.dll/article?AID=/20100927/RETAIL07/100929866/1142#ixzz10l5VXtg1

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Report: Bill aimed at giving auto dealers more credit is signed into law

by Jonathon Ramsey (RSS feed) on Sep 28th 2010 at 9:59AM

The federal government is keeping up its effort to stimulate the economy, while the economy is keeping up its resistance to those efforts. The latest effort to prod spending comes in a bill that, among other things, increases the federal guarantee for small dealer floorplan loans from the Small Business Administration from $2 million to $5 million. Part of the bill would also reinstate fee waivers that ran out in May, meaning loan applicants could save more than $50,000 in fess alone on a $2 million loan.

Federal floorplan assistance has been around for a year, but banks haven't been receptive and some believe that raising the limit won't change that. It is customers who are needed to provide the real relief, and in the words of a former Federal Reserve vice chairman, "If the economy grows at one and a half percent, we're spitting in the wind because there's no demand."

The bill passed the House and Senate along party lines and President Obama signed it into law yesterday afternoon. This is expected to be the last jobs bill to leave Congress before the midterm elections in November.

link:

http://www.autoblog.com/2010/09/28/report-bill-aimed-at-giving-auto-dealers-more-credit-is-signed/

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