NEW YORK -- About 10,000 auto dealers and an untold number of suppliers will be eligible for federally backed loans of up to $2 million each under a new Obama administration program announced today.
The temporary Small Business Administration plan will loosen eligibility requirements for working-capital loans starting early next week, the agency said in a statement today. The loans for working capital typically are provided by small regional banks and guaranteed by the federal government.
Although only about 25 percent of the 19,000 U.S. auto dealers have been eligible for the assistance, that percentage will more than double under the new program, said John McEleney, chairman of the National Automobile Dealers Association.
This means that thousands more dealers will be able to avoid layoffs, make payroll and keep employees, he said in an interview.
The money can be used for daily operational expenses, McEleney said. The dealers group is trying to get more federal aid for floorplan loans, which can be used to purchase new cars from automakers, he said.
The new program will be in effect through September 2010, the SBA said. It will affect all small businesses, not just auto dealers and suppliers.
A spokesman for the Original Equipment Suppliers Association did not immediately respond to a request for comment.
The new eligibility requirements are based on net worth and net income rather than revenue.
To qualify, a dealers company and its affiliates must not exceed $8.5 million in net worth and $3 million in average annual net income after federal income taxes, excluding carryover losses, for the two preceding fiscal years.
SBA loans cannot be used to finance dealership floorplans. Dealers use floorplan loans to finance the purchase of new vehicles.
The typical floorplan loan is for $5 million. "Two million dollars is extremely helpful, but it's not large enough to help a dealer's floorplan," Bailey Wood, NADAs legislative director, told Automotive News yesterday. NADA is lobbying the federal government for more floorplan financing, Wood said.