According to a statement released by the U.S. Small Business Administration on May 28, 2009, automobile, recreational vehicle and boat dealers will be eligible as of July 1st to apply for government-guaranteed loans to finance dealership inventories. According to SBA administrator, Karen Mills “Countless small businesses, including dealerships, across the country are facing significant challenges as a result of the uncertainty in the auto industry…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,” she said in the released statement.
Commenced as a pilot-program aptly titled “floor plan financing,” will allow dealers to borrow a minimum of $500,000 to as much as $2 million, against their inventory, and then repay the debt as they sell automobiles. With a 75 percent government guarantee, borrowers will be expected to repay the loan in full within five years.
With funding coming from President Obama’s American Recovery and Reinvestment Act of 2009, Karen Mills along with Ed Montgomery, Obama’s appointee as Director of Recovery for Auto Communities and Workers, made the announcement for the SBA pilot-program in Kokomo, Ind. While the program is expected to run through at least September 30, 2010, SBA officials will decide at the time whether or not it will be extended.