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Improvements Coming to SBA’s Dealer Floorplan Program

President Obama signed into law this week legislation that includes improvements to the Small Business Administration’s Dealer Floorplan Pilot Program (DFP). The new program allows RV dealers to borrow more money for floorplanning (up to $5 million) while still receiving relief from SBA loan fees.

The new program, which will run through Sept. 13, 2013, also allows RV dealers with a higher net worth – up to $15 million – to participate. Lenders told SBA that these changes to the time frame and loan amount would remove two key barriers to lender participation in the floorplanning program.

The current DFP pilot program ends on September 30, 2010, although the loans for auto, boat and RV dealers made under that program will continue unaffected. The new program guidance will be published in the next month or so by SBA. The agency says it is now at work crafting new credit models, policies and procedures for the new program, on an accelerated schedule, to keep the period between the two programs as short as possible.

A coalition of trade associations, including RVIA, RVDA, marine, auto, trailer and manufactured housing dealers and manufacturers pushed for passage of this legislation and will continue to work with SBA to ensure that the new DFP includes more of the improvements these groups and their industry lenders have recommended to SBA during the formation and implementation of the original DFP program.

“The improvements specified by the new legislation should help to attract more lenders to SBA's DFP program, hopefully providing RV dealers with additional floor plan opportunities," said Dianne Farrell, RVIA vice president of government affairs.

Changes made by the new law include some new features, and also put into law some features that previously were only in SBA guidance on the program. Other features of the program will be part of the new guidance document SBA will publish:

•   A loan amount between $500,000 and $5 million (previously limited to $2 million), for a term of not more than 5 years (same as original DFP program).
•   A new size standard allowing larger businesses to qualify as a small business under the new DFP, as follows: the maximum tangible net worth of the business cannot exceed $15 million; and, the average net income after federal taxes (excluding carry-over losses) for the 2 full fiscal years prior to the date of the application for DFP is not more than $5 million.
•   An advance rate of up to 100 percent of the value of the goods to be purchased may be offered by lenders (same as original DFP program).
•   An SBA guaranty of between 60 percent and 75 percent (same as original DFP program). The new law does not specify which vehicle advance rates would be eligible for a certain guaranty; that is still left up to the SBA to specify in its new guidance. In the original DFP, the advance rate was tied to the guaranty rate.
•   An extension of the DFP program to September 30, 2013 (was September 30, 2010).
•  The continuation of relief from SBA fees for borrowers. SBA said that the “extraordinary servicing fee” lenders may charge dealers for servicing the loan might still be included in the new program.
•  “Eligible retail goods” that can be purchased under the new DFP are still automobiles, recreational vehicles, boats, and manufactured homes which can be titled under state law.

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