The federal government has suspended its floorplan financing program for small dealerships and now plans to have a new program offering larger loans operating in the spring, a Small Business Administration official said.
The new, federally backed loans will be accessible to most dealerships, said SBA spokesman Michael Stamler.
The limit on SBA-backed floorplan financing was raised to $5 million from $2 million by a law enacted last month. The change seeks to improve a 17-month SBA program that never got off the ground and was suspended Sept. 30, an internal agency document shows.
The SBA is setting up a lenders' conference next month to line up more participation in the program and seek suggestions for program regulations to be adopted in February.
Dealers should wait until at least late March or early April to apply for assistance, said Grady Hedgespeth, director of the SBA's Office of Financial Assistance.
"We're trying to move at lightning speed," he said.
The new program, pushed by President Barack Obama and congressional Democrats, seeks to provide more credit for dealerships and other small businesses while the economy is still struggling.
Under the program, dealers apply to banks for floorplan credit of as much as $5 million. The SBA guarantees repayment of 75 percent of the loan.
The new regulations will address nuts-and-bolts questions of how the financing will work, including questions about interest rates and repayment terms, Hedgespeth said.
In part, the standards will seek to cut federal red tape for large banks to increase their participation in the program, he said.
After the regulations are announced, lenders will need at least six more weeks to consider whether to participate and adjust their computer systems, Hedgespeth said.
About 5,700 more dealerships than before will be eligible for the program as a result of an SBA rule adopted this month, Stamler said. The rule allows dealers with 200 or fewer employees to qualify as small businesses.
The vast majority of all U.S. dealerships may be eligible for the federally backed loans, the SBA spokesman said.
Under the previous program, only dealerships with less than $29 million in average annual receipts were eligible. About half of the 18,000 dealerships in the United States would have qualified, the National Automobile Dealers Association estimated.
Only about 75 SBA-backed loans were extended for about $75 million between May 2009 and the end of September 2010.