House to Take Up Bill Allowing Dealers to Receive Up to $5M in SBA-backed Loans

WASHINGTON - The House next week will take up a bill passed by the Senate that would enable small auto dealers to receive federally guaranteed loans of as much as $5 million -- up from $2 million, Automotive News reported.

The provision is part of a small-business jobs bill that seeks to increase lending and would provide $12 billion in tax cuts to small businesses.

House Majority Leader Steny Hoyer said that Democrats are discussing how to proceed with the Obama administration-backed legislation that passed the Senate Thursday with two Republican votes.

The dealer portion of the legislation seeks to loosen credit by increasing the maximum size of a federally guaranteed loan that can be extended by the U.S. Small Business Administration.

It would affect the SBA's year-old floorplan financing program for dealers, which has struggled to attract lender participation.

"This bill will provide needed assistance to small businesses and help them expand and add jobs,” Hoyer, D-Md., said in a statement.

With President Obama, the Senate and House leaders now behind the bill, it seems increasingly likely to be enacted as Democrats try to provide a jobs stimulus in advance of the Nov. 2 congressional elections.

The National Automobile Dealers Association hailed Congress today for its efforts to raise loan limits to $5 million for small businesses..

“Five million dollars is such a key number for dealers,” NADA spokeswoman Bailey Wood said. “Nationally, dealers on average hold approximately $5 million of inventory.”

The Senate bill also would increase the portion of the loan that is guaranteed by the federal government.

Currently, the government backs 75 percent of loans of up to $2 million to small businesses. Under the legislation, it would guarantee 90 percent of loans of up to $5 million.

Together, the lifting of loan limits and the increase in the federally-backed portion of the loan would be “huge,” Wood said.

The credit crisis has made it difficult for many dealers to obtain floorplan financing from lenders, especially since U.S. auto sales plunged to 27-year lows last year and have been slow to recover.