Floor Financing Crisis
Of all the difficulties dealerships may face during this most unusual of economic storms, the loss of a floor plan may be the worst. Banks, including Sovereign, have stated their intent of leaving the marketplace. Now NHADA has learned that Citizen’s Bank also has plans to exit as a floorplan lender.
Many other lenders, including the captives, either aren’t taking applications or have a huge backlog. In normal times the processing of these applications takes six months. Today that process takes much longer. Finally, domestic dealers in particular have found it nearly impossible to get in the proverbial door simply because they sell domestics!
So what can be done? When faced with the challenge of undoing the mythical “Gordian knot” Alexander the Great simply clove the tangled mess in half with his sword. Though there is no such simple solution for this knot, your New Hampshire and National Automobile Dealer Associations are taking the following actions:
On a state level, New Hampshire Automobile Dealers Association is working with the state to try to keep floorplan lenders in the floorplan market. Unfortunately, most of these lenders are not state-licensed banks. Representatives from your Board of Directors have met with Governor John Lynch to alert him to this crisis. A second meeting is now being arranged with Governor Lynch, various bank leaders including Citizens and Sovereign, and other state officials like the Banking Commissioner.
At the very least, we hope to persuade the lenders that if they do exit the marketplace or withdraw individual lines of credit, they need to give the affected dealers enough time to find a new line of credit.
Finally, New Hampshire needs to encourage state banks or credit unions to enter the floorplan marketplace, especially to assist dealers with floorplan needs of less than $4 million.
On a national level, the National Automobile Dealers Association (NADA) has been working with the U.S. Treasury Department to reopen the floorplan securitization market and thereby provide capital to the traditional floorplan lenders, whom will then have the resources they need to once again extend floorplan financing to dealers. This program is called the Term Asset Backed Securities Loan Facility (TALF). The initial release of TALF monies did not apply to floorplans and is not expected to significantly enhance the availability of credit for floorplan loans.
NADA is attempting to modify the eligibility criteria in subsequent fundings of the TALF as soon as possible. More information can be found at www.nada.org. NADA and NHADA have also been working with Senator Jeanne Shaheen’s office to make her aware of the situation and to arrange a meeting much like the one with Governor Lynch.
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Results of March 6-9, 2009 Floorplan Survey |
|
|
27% |
of dealers report that their floorplan lender announced or threatened it will be exiting automotive lending. |
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44% |
of dealers report that their floorplan lender increased curtailment terms. |
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42% |
of dealers report that their floorplan lender increased financial covenant requirements. |
|
75% |
of dealers report that their floorplan lender increased percentage rates. |
|
46% |
of dealers report that their floorplan lender reduced floor plan limits. |
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25% |
of dealers report that their floorplan lender forced the dealer to agree to modifications of the floorplan note under threat of otherwise calling the note. |
|
10% |
of dealers report that their floorplan lender demanded full payment of the full balance of the floorplan note. |
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$3.8 |
million is the average floorplan balance for all reporting dealers. |
|
$5.9 |
million is the average floorplan limit for all reporting dealers. |
|
78% |
of dealers have an average floorplan of less than $4 million. |
For further information, contact me at 800-852-3372 or e-mail me at pmcnamara@nhada.com.
