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Senate Passes Bill to Guarantee $5 Million SBA Loans

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On: Mon, Sep 20, 2010 at 9:07AM | By: Sherry Christiansen

 Senate Passes Bill to Guarantee $5 Million SBA Loans

In automotive news, the Obama Administration has agreed to guarantee loans for small auto dealerships of up to $5 million with a bill that passed the Senate last Thursday. The federally guaranteed loan amount was only $2 million in the past and the bill raised the limit to $5 million.

The stipulation resulted from a new jobs bill for small businesses. It was intended to increase lending. Federal tax cuts of $12 billion were also offered to small businesses in hopes that the result will be an increase in hiring for many companies that have been in dire financial distress. The legislation plans to assist small businesses in being approved for loans by increasing the maximum federal guaranteed loan amount that small dealerships will qualify for, which will in turn cause credit requirements to be lowered by the Small Business Association (SBA). This new bill will improve last year’s “floorplan” financing program offered by SBA, which was not very effective in gaining participation by lending institutions.

The credit crisis in today’s U.S. economy has impeded floorplan lending from financial institutions, particularly after the automotive industry has taken such a big hit, posting 27 year record low sales profits this year. Small dealership closings across the country have also had an impact on lender reluctance to extend credit to auto dealerships.

According to Bailey Wood, a National Automobile Dealers Association spokesperson, “Dealers strongly urged the House to take up and quickly pass the Senate bill un-amended.”

President Barack Obama encouraged both the Senate and the House to act quickly and approve the bill when it was presented on Thursday. The final vote was 61-38 Democratic majority with only two Republican voters in the senate—George LeMieux of Florida, and George Voinovich of Ohio—according to automotive news.com.

Mary Landrieu, Senate Small Business Committee Chairwoman, who originally sponsored the bill, reported that the bill’s approval was “a long-awaited victory for the 27 million small businesses in America.”


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