SBA program helps dealers secure loans

Washington has come to the aid of banks, homeowners and car makers. Now, it's trying to help auto dealers with a new loan program.

If only lenders cooperate.

Under a program to begin July 1, the U.S. Small Business Administration will offer a 75 percent government guarantee on loans dealers take to buy inventory.

Loans for $500,000 to $2 million are available under the "floor plan" financing program, a piece of the stimulus package. The program is aimed primarily at independent used-car dealers, whose financing has largely dried up. But some of the dealers worry that lenders won't take part in the program, even with the guarantee.

Dealers typically stay in business by borrowing against their inventory to buy more inventory, then repaying the debt as they sell the cars. The SBA program sets up a line of credit enabling dealers to borrow what they need; it also enables them to borrow against the line of credit again as they pay it down. Mark Brandt, owner of Brandt Auto Brokers, an independent retail and wholesale dealership in Marietta, said the Birmingham, Ala., bank that has been financing his inventory and that of other dealerships has pulled out of floor planning. Other banks, he said, have declined to fill the gap.

"We need capital to put inventory on the ground. Without that capital, we're out of business, which I may be," said Brandt, who said he was profitable last year, even as the recession hit and auto sales plunged.

Brandt said the program has merit but questions how many banks will participate. SBA-approved lenders would have to make the loans, not the SBA, which only guarantees them.

"There are very few banks that make loans like this," said Dave Malone, co-owner with of Malones Automotive in Marietta. He said that without a loan, his dealership may have to downsize despite their strong sales figures.

Terri Denison, district director of the Georgia SBA office, said floor-plan financing is a specialty area that most lenders don't do.

Owners of some of metro Atlanta's largest auto dealers say they already have sufficient credit lines and are not planning to tap into the program.

Dealers of recreational vehicles, manufactured homes, boats and motorcycles are also eligible.

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