SBA's New Floor Plan Program

The Small Business Administration recently announced a new Dealer Floor Plan program to assist car, motorcycle, boat and motor home dealerships secure financing for inventory. This should help many of our clients in this business, but you have to act fast as funds may run out.

Details are as follows:

Dealer Floor Plan (DFP) Financing Pilot Program
Beginning July 1, 2009, the SBA will introduce the Dealer Floor Plan (DFP) Financing. This program offers government guaranteed loans to finance inventory for eligible auto, RV, boat (including boat trailer), motorcycle, manufactured home and other dealerships under a new pilot program that runs through September of 2010. When each piece of collateral is sold by the dealer, the loan advance against that piece of collateral is repaid and the dealer borrows against the line of credit to add new inventory. Here are some of the highlights:

* Size of the loan is $500,000 (minimum) up to $2,000,000 (maximum)
* Borrowers will receive a fee reduction as outlined in the recent changes to the standard 7(a) loan programs
* The maximum guarantee is 75% as opposed to the 90% in the standard program
* The maximum term for the DFP loan will be five years
* Loans will only be made for inventory that can be titled

For complete details visit http://www.sba.gov/floorplanfinancing/index.html

SBA Announces Rescue Plan, Will It Work?

On Monday, the Treasury Department announced the details of a rescue plan to expand the small-business loan market. The details, which you are found here, explain that the Treasury Department is going to spend $15 billion buying securities made up of packaged SBA loans from the 7(a) and 504 programs. The major points of the plan are:

1. Dedicate $15 billion to purchase SBA loans

2. Temporarily raise SBA guarantees to issuing banks to 90% (up from current guarantees of 75% and 85%)

3. Eliminate SBA fees to both the business getting the loan and the issuing bank to lower the overall cost of capital

These are all great steps to loosen credit for small business owners. This will also spur many business owners to seek capital through traditional bank loans. However it does nothing to address the lending guidelines that issuing banks have.

I've received numerous inquiries from agents asking, "How will this affect the financial product I sell?" Many are worried that the new guidelines will result in less businesses to utilize the MCA. What we have seen over the past week is just the opposite.

The announcement has lead to a surge in business searching for capital, whom the majority do not qualify for an SBA loan. This leads many of those to discover the merchant cash advance product for the first time. Even better for those selling our product is that these new customers are much more credit worthy than the previous businesses, resulting in higher approval rates from MCA providers.

Now is a great time to take advantage of this upswing in business. The most successful realize that these new prospects coming into the market are also different than previous clients. Being a new product to them, the clients need to be fully educated about what an merchant cash advance is. Also, these new clients tend to be more experienced and more educated. They do more research and take their time making financial decisions. An agent who takes a more consultative sales approach focusing on customer service will not only be more successful, but will also land a client for years to come and generate multiple referrals.