SBA Starts to Accept Floorplan Apps Today

Dealers in need of inventory financing can tap a new federal program starting today.

The Dealer Floorplan Pilot Program, an initiative of the Small Business Administration, will guarantee inventory lines of credit between $500,000 and $2 million. The agency will start to review and approve applications starting next week.

Here are some guidelines of the program:

• Dealers of titleable assets — including autos, motorcycles, boats, RVs, and manufactured houses — may apply
• Loans are guaranteed up to 75% (not the 90% level specified by the Recovery Act)
• Lenders may charge a servicing fee higher than the 2% allowed by SBA regulations
• Advance rates guaranteed by the SBA are 90% on new-vehicle inventory and 80% on used-vehicle inventory (lenders may offer higher advances, but the SBA will only guarantee 75% of the approved advance amounts)

Click here for the Federal Register article: Dealer Floorplan Pilot.pdf

Tags: advance, dealer, floorplan, inventory, sba

Comment by Edward T. Grass on July 1, 2009 at 1:04pm: Does anyone know of any banks or lenders that are actually utilizing this program? It sounds like a great idea, although the $2,000M limitation will not support the vast majority of dealership requirements. Also the 90% advance on new vehicle inventory will present some challenges in regards to factory drafting.

Comment by Chuck Carboni on July 1, 2009 at 2:44pm: The first thought that went through my mind as well was how will manufacturers draft if the lender restricts new advances to 90%.... a 100% advance with an immediate 10% curtailment due from the dealer perhaps?

I'm not aware of banks/lenders that are using the program - and while the $2,000m cap would preclude most if not all larger/high volume stores from participating, at the same time there's a lot of smaller, non-metro stores who might be able to take advantage of this offering.

Comment by Marcie Belles on July 1, 2009 at 2:59pm: I think SBA is just trying to mitigate its risks. It had originally planned for lower advances, but then spoke to lenders that say they normally advance more. Essentially the SBA is now saying: You can advance at 100% if you want, but we're only going to guarantee up to a 90% rate.

The advance rate was one of the biggest issues the SBA had to deal with to come up with a feasible plan.