The US Small Business Administration pilot program (SBA), announced since May, will offer guarantees that apply to 75 percent of loan amounts ranging from $500,000 to $2 million, with a maximum repayment term of five years. Almost half of of the 18,000 US dealers which qualify as small businesses are eligible for the SBA plan.
"The SBA program is a phenomenal step to expand access to credit for dealers," Bailey Wood, National Automobile Dealers Association (NADA) spokesman was quoted as saying by the source. Regulations for the SBA plan were published today in the Federal Register.
"Because of the severe decrease of dealer floor-plan financing over the last several months, each of these loans most likely will keep open a viable business that would have otherwise closed," the SBA said in a statement.
To qualify as a small business under SBA regulations, a dealer must meet one of two conditions. One, it must have had $29 million or less in annual gross revenue averaged over the last three years and second, it must have had a net worth below $8.5 million and average after-tax net income (excluding carry-over losses) of less than $3 million for the last two completed fiscal years.
Still, SBA expects than fewer than 4,000 loans will be guaranteed over the next months. SBA is not yet able to make a full year prediction.
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