Dealers say finding lenders for SBA program is difficult

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When the Small Business Administration announced a new dealer floorplan loan program several weeks ago, it was heralded by industry leaders as a way to ease the credit crunch.

Since then, many dealers have complained that they can’t find SBA-approved lenders that offer floorplan financing.

Industry leaders continue to praise the program, however, and say dealers need to put more effort into educating the banks about floorplan financing and about their business.

“We really do feel the SBA floorplan loan program is a first step in improving access to credit for dealers,” said Cindy Squires, legislative counsel for the National Marine Manufacturers Association, in a conference call Wednesday afternoon to address these concerns.

“It is going to be a process of educating a lot of regional banks,” she continued. “It’s not going to be a matter of just flipping a switch.”

As of July 1, dealer floorplan loans are available for a minimum of $500,000 up to $2 million under the SBA 7 (a) loan program. With a maximum repayment term of five years, the loans will come with a 60 to 75 percent government guarantee.

Phil Keeter, president of the Marine Retailers Association of America, said a lot of dealers have called their local banks and have not pursued this as much as they should. “You’re going to have to make a presentation for them to do it,” he said.

Jim Coburn, president of the National Marine Bankers Association, said dealers need to develop a game plan.

“Look for those who are SBA approved, make an appointment to see them, and tell them about your business and your industry,” Coburn said. “Have a business plan and have your data with you. Some of these banks don’t really know what floorplan lending is. It does take a lot of work on the dealer’s part to get this done. It is relationship building.”

Even Sloan Coleman, a representative from the SBA, said one of the toughest parts of this program is finding a lender and educating different departments within the bank.

“The floorplan lending department of a bank knows nothing about SBA, and the SBA department knows nothing about floorplan lending,” he said. “Understand, the program is so new that lenders are still reviewing the information.”

Coleman said that as floorplan lenders who offer SBA loans become known, that information should be shared among the trade associations and throughout the industry.

“We’re trying to get the word out as much as possible,” said Squires. “Some manufacturers are talking with lenders on behalf of their [dealer] networks.”

One other common complaint among dealers is that the lending requirements are too stringent. Some have said banks require all interest, fees and curtailments to be paid and current with the present lender, and last year’s financial statements must show a profit. Dealers say it might be difficult in this economic environment to meet those requirements.

“We did not impose a requirement that the business had to show a profit in the last year. The lender establishes the criteria,” said Coleman from the SBA.

Squires said the banks simply want to make sure the business is financially sound and that there is some assurance it will continue as a going concern.

— Melanie Winters

m.winters@tradeonlytoday.com

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Comments

3 comments on “Dealers say finding lenders for SBA program is difficult

  1. Noel Osborne

    It continues to amaze me that this industry continues to push these SBA programs knowing full well that very few dealers stand a prayer of a chance of meeting the criteria for eleigibility for them. If they were profitable for two out of the past three years or had positive cash-flow two out of the last three years, as required by the ARC program, they probably would not need help in the first place. Bankers have publicly stated that they are “scared to death” by the ARC requirements and are for the most part have no interest in it. It is much the same story with the TALF program. I doubt that your local bank is going to set up a floorplan department to loan money in today’s environment when they were not interested in doing it when times were good. Maybe our industry leaders should be more proactive in getting the SBA’s so called “haircut” requirement reduced so some of our dealers can qualify for these loans. I certainly sympathize with those dealers who are frustrated because the banks are virtually showing zero interest in these programs. Don’t blame the dealers when it is not their problem.

  2. TERRY DICKERSON

    IT IS SAD BUT THE FEDERAL BANK EXAMINERS MAKE IT HARD FOR A BANK TO LOAN MONEY TO A COMPANY THAT IS IN A DEPRESSED INDUSTRY. WITH AN SBA GUARRANTY THE EXAMINERS MAY STILL MAKE THE BANK CLASSIFY THE LOAN AS A POSSIBLE LOSS. MR. OBAMA NEEDS TO TAKE A LOOK AT THIS PROBLEM.

  3. John B. Langley

    I cannot find a bank in my area that will participate in this program. What are some solutions to this problem.
     

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