Editor's note: An earlier version of this story incorrectly said the legislation would increase the portion of each loan backed by the U.S. government. The portion remains 75 percent.
Thousands of small auto dealerships will qualify for federally guaranteed loans of as much as $5 million under a bill due to be signed this week by President Barack Obama.
The legislation, passed by the House last week, will raise limits on loans backed by the U.S. Small Business Administration to $5 million from $2 million for small businesses, including auto dealerships.
That will affect the SBA program of floorplan financing for dealers. Banks, credit unions and other lenders have been reluctant to participate in the 17-month-old program.
The legislation keeps the portion of each loan that is backed by the federal government at 75 percent.
And it waives lender fees of as much as $54,000 on a $2 million loan. The lender can pass the fee on to dealers, SBA spokesman Mich-ael Stamler said.
Only one Republican in the House and two in the Senate voted for the bill.
More than half of the 18,000 dealerships in the United States will qualify as small businesses for the floorplan financing assistance, said Bailey Wood, a National Automobile Dealers Association spokesman. "NADA will now reach out to lenders to increase interest in the program," he said.
To qualify, dealerships must have average net income of less than $3 million after taxes and tangible net worth of $8.5 million or less, Wood said.
The SBA's floorplan financing program began in May 2009 but never got off the ground. Only 61 SBA-backed floorplan loans totaling $61 million have been approved for dealerships, Stamler said.
Lenders have cited government red tape and fees, their own staffing constraints and lack of familiarity with floorplan financing.
