News From the
Committee on Small Business
Nydia M. Velázquez, Chairwoman

For Immediate Release                                                       CONTACT:  Alex Haurek; Duncan Neasham
June 3, 2009                                                                                                                 (202) 226-3636

Velázquez Questions Small Business Agency on Auto Dealer Lending Plan

WASHINGTON, D.C. —Rep. Nydia M. Velázquez (D-NY), the Chairwoman of the House Committee on Small Business, wrote yesterday to Small Business Administration (SBA) Administrator Karen Mills regarding a recently announced initiative to offer government guaranteed loans to finance inventory for automobile, recreational vehicle, boat and other dealerships. In her letter, Velázquez questioned why the SBA would break from its longstanding practice of not utilizing its financing programs for wholesale lending.

“Because lenders are limited in their ability to exercise full control over the financed items, the exposure to loss in floor plan loans is greater than in other types of financing,” Velázquez’s letter states. “While clearly there is a need to provide this industry with transitional assistance, doing so by focusing on inherently risky financial arrangements seems questionable.”

In addition, the Chairwoman noted that the SBA still has not implemented many programs it is charged with administering under the American Recovery and Reinvestment Act (ARRA), legislation the Congress passed and the President signed into law in February to reinvigorate the economy.

“Given the complex nature of this new program (floor financing), the agency has clearly dedicated a significant amount of time and resources on the proposal’s development,” Velázquez’s letter continues. “At the same time, however, over 50 percent of the Agency’s responsibilities on ARRA remain unimplemented. These provisions were due to be completed over 100 days ago.”

A copy of the letter is available online by clicking here.

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