Autos Task Force to Consider SBA Loans for Dealers

April 23, 2009 - 5:28 PM
A national auto dealers group said Thursday that President Obama's auto task force is considering extending loans usually reserved for small businesses to dealers, making it easier for them to borrow money to acquire showroom vehicles.
Detroit (AP) - A national auto dealers group said Thursday that President Obama's auto task force is considering extending loans usually reserved for small businesses to dealers, making it easier for them to borrow money to acquire showroom vehicles.
 
According to the National Automobile Dealers Association, which met with the task force Thursday morning, the government is considering ways to help dealers access money to buy cars to stock their lots. Frozen credit markets have yet to thaw since banks received TARP aid, said NADA chairman John McEleney, causing dealers continued difficulty in acquiring loans and staying afloat.
 
"There are a lot of departments of government involved, but the task force agrees with dealers that credit is a significant problem," he said. "They wanted to know if we were seeing improvement in credit and dealer financing. We're seeing some on the retail side but we still need help with floor plan loans."
 
Most dealerships do not qualify for the typical loans from the Small Business Administration, because they have gross receipts of more than $29 million, including sales of cars, service and parts.
 
"One of suggestions we made to the task force was to go to an employee-based size standard," said Andrew Koblenz, vice president of legal and regulatory affairs for NADA. "The mechanism they choose doesn't account for the fact that cars have gotten more expensive over time, but the returns don't get larger."
 
SBA spokesman Mike Stamler said administrator Karen G. Mills indicated during her confirmation hearing earlier this month that the agency would look "seriously" at expanding SBA lending to cover auto dealers. Stamler said there was no timetable yet for implementing such a plan and no details were available, but noted that the SBA used a similar temporary program to help dealers in the late 1970s.
 
The task force also wanted to know how employees would be affected should one of the automakers file for bankruptcy, NADA VP Koblenz said. Nearly 500,000 are employed at GM and Chrysler dealerships nationwide. A Government Accountability report on the auto restructuring plans released Thursday said that more than 900 dealers closed in the past year and that dealer employment was down.
 
A typical dealership employs about 55 people, including technicians. Under current rules, only about 15 percent of dealers, with fewer than 30 workers, would be eligible for a loan, McEleney noted.
 
"While they wouldn't all be out of jobs, a lot of them would be," McEleney said. "They asked if it would have a devastating effect on employment across the country."
 
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AP Business Writer Stephen Manning in Washington contributed to this report.