Dealer Outlook

Trade Only Dealer Outlook Blog

NMMA, MRAA join with auto dealers in pushing SBA loans

Yogi Berra once said: “It ain’t over till it’s over!” If he was saying that today, he might be referring to the SBA’s 7(a) dealer floorplan program (DFP). Yes, it’s been a bust to date, but it ain’t over . . . at least not to groups like the auto dealers (NADA), RV dealers (RVDA), RV manufacturers (RVIA), boat dealers (MRAA), manufacturers (NMMA), among others.NADA has taken the point in pursuit of major improvements to the DFP program that could make it work for retailers. To better understand why the DFP isn’t working, NADA commissioned a survey of 40 current and prospective floor plan lenders specifically to determine: (1) if they reviewed the DFP and decided not to participate; (2) if something in the DFP is keeping them from participating; and (3) if the DFP could be changed to entice them to participate. 

One thing the survey didn’t need to learn was that lenders participating in the DFP are as hard to find these days as an effective Congressman. Even banks accustomed to doing SBA loans haven’t delivered.  For example, according to a review recently done by the St. Petersburg Times, Bank of America, long the top SBA 7(a) lender in South Florida, is a mere shadow of its former self making just $3 million in such loans last fiscal year, down a whopping 86 percent over the prior year.

Clearly, if the SBA is to really deliver on its claim to help small businesses, the DFP must be radically improved with incentives. A major strategy planning meeting that includes MRAA and NMMA will be hosted by NADA. To see these and other organizations forming a coalition to powerfully influence the changes needed to make the 7(a) program work is a welcomed development. 

As the groups prepare to meet, the NADA has identified from the survey a variety of changes immediately needed and has sent them on to SBA. Here are highlights:

1. Support an increase in the maximum loan amount from $2 to $5-10 million. (As Yogi once said: “A nickel ain’t worth a dime anymore!”)?
2. Lower the minimum loan amount from $500,000 to $100,000. ?
3. Allow both depository and non-depository institutions to participate if they are “experienced,” or if they are “less experienced,” but can demonstrate a reasonable ability to do so, even with no existing business relationship with an applicant. ?
4. Allow loan advances up to 100 percent of wholesale value for either the purchase of additional inventory or to refinance an existing floor plan line.
5. Raise the maximum guarantee from the variable 60-75 percent to a flat 90 percent and support an extension of the 90 percent ARRA guarantee. ?
6. Extend the DFP program beyond 9/30/10 to three years or more; perhaps even permanently.
7. Allow DFP applicants to apply for separate individual lines with separate guarantees subject to a reasonable total cap amount
8. Recognize the degree to which lenders outsource floor plan software and servicing and reduce or adjust in-house lender qualifications commensurately.
9. Allow all lenders to charge above the 2 percent cap on extraordinary servicing cap fees and continue to waive SBA borrower fees.
10. Allow DFP loans to be eligible for securitization just as other 7(a) loans are.
11. Reduce or eliminate to the greatest extent possible any “onerous” lender requirements associated with making SBA 7(a) loans.  ?
12. Increase and improve DFP marketing to lenders, dealers, SBA personnel, and  other interested parties by leveraging trade association outreach, by contacting all SBA and floor plan lenders directly, and by having local SBA personnel meet with the lenders in their area, and maintain a database of floor plan lenders willing to take new applications.       

For SBA, now is the time to act on input like this. For us, remember what Yogi said.


7 comments on “NMMA, MRAA join with auto dealers in pushing SBA loans

  1. Komrade Carl

    I continue to read how dealers must have a source to finance their inventory. Sorry if I’m old school but I thought if you wanted to be in a retail business like a fruit stand, a hardware store, a clothing store, boat store, etc. that you had to purchase your inventory with your own Money. I believe that the experiment & the prevaling business practices taught at our schools of higher learning, are over with & have put us in the economic situation we find ourselves. Any credit terms beyond 45 days will result in well what we have today. If you have to use OP (other peoples money) you need to be prepared to pay what ever they want for the use of their money.
    I hate this wining from those that decided to get into businesses that they can’t afford to be in. The business model of the past 20+ years has failed. Bigger wasn’t better. Case inpoint Intrped boats, from what I read yesterday (employing folks, have good backlog, own their own dirt, machines, etc) doing OK thank you very much, even as their competitors are discounting & giving there products away at below profit margins.
    If you need “OP money” I hear all the time there is huge amounts of private funds on the sidelines watching for an entry point in the stock market or ready to invest in those things that will give them a better secure return on their investment. Look in the mirror & ask your selves: If I had $1 million sitting in a bank would I lend it to in $100k chunks to 10 boat dealers at 4-5%??? Well would you…..

  2. steve s

    Carl, sadly the answer is hell NO! At this point, Tony Soprano might be in at 12%. Banks won’t be interested in the boat business until the grifters are gone and dealer protocol is changed. We can thank outfits like Passport, MonopolyMax and many others for that. Their Madoffesque dealings with banks are the main reason why we can’t floorplan or finance a dock rope without 30% down.

    When will the Marine Industry be done wasting time with the Senate/Team Pelosi and have urgency to create new retail financing with banks??

  3. Doug Reimel

    I just want to say one thing. If the banks would, could lend money to the retail buyer all of this would be a mute point. Not defending the banks but… when people with above a 750 score walk away from their mortgage because the property value is less than what is owed on the property. Who do the banks loan money to.

  4. Jim Coburn

    Not sure if you recall, The NMBA and some of it’s directors have worked hard on this issue. As stated several times prior, it’s not going to be a fit for everybody. We did go to Washington on three occassions to meet with the SBA with solid success – that helped lead to the current propsals that are out there right now. This is just one means to help in the current econonmic climate. We have a long way to go yet, but we will keep at it.

  5. dave boso

    In the day I would buy a load of boats and write a check for 5 or 6 grand that all went away in the 80tys and 90ties now 80 90 grand for a load I don’t need a lot of f/p just a little to make up the diff..

  6. Mark Qualkinbush

    Let’s face it wholesale financing is a huge issue but we keep looking to fix a problem and not what caused the problem. I think Carl has the right thought process going in order to understand our problems faced in the current market. The first question asked should be; if I had 200k sitting around right now would I invest in new boats? Given the current market all of you should say no. Where is my gaurantee as an investor I will get a decent return on my cost of goods and the expenses that a boat dealership needs to function correctly. The question is where is an investors / bank / dealer opportunity in relation to the risk associated with such a gamble? Yes, I just called the boat business a gamble thus no bank is going to be crazy enough to do business with us unless we change the way we do business.

    Sales managers at Boat manufacturers need to get on the job and go to banks and start working on a dealer / manufacturer relationship then the builders will understand the criteria, ratios and profit margins needed to make a healthy working relationship. All Contracts from builders that have the 30 or 60 day opt out clause for either party should be done away with. The manufacturers are going to assume some of the risk for banks to be happy. Maybe franchising dealers is something that must happen it’s just an idea. I know builders don’t want to hear that.

    We can address this floor plan issue until we are blue in the face, it’s not going to change until we change are business model.

    Mark Q

  7. Schwarzel

    Face it guys the current resadent of the white house wants all of us to fail. Makes his welfair rolls bigger. I don’t trust these guys, any of them. You can talk all you want, to officals but they want all of us to pay. Some of us are a succusful, the libs hate that they want all of us to “go away”.
    I went to cash, reduced my stock and will wait it out untill we vote out these clowns and put the “GROWN-UPS” back in charge. HOWS THAT HOPE AND CHANGE WORKING FOR YOU?????

Leave a Reply

Your email address will not be published. Required fields are marked *

Comments are moderated and generally will be posted if they are on-topic and not abusive. For more information, please see our Comments Policy.