House chair criticizes SBA

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The SBA announced it temporarily will allowe auto dealers to useits 7(a) business loan program to financs vehicle inventory. Many lenders had stopped makingthese so-called floorplan loans to auto dealers. Rep. Nydiq Velazquez, D-N.Y., who chairs the , fear “there is a significantly highe risk ofloan defaults” on these floorplam loans. This could force the SBA to increass the subsidy ratefor 7(a) which would make the loans costlier for future borrowers. In a June 2 letter to SBA AdministratoerKaren Mills, Velazquez noted the SBA had “longb prohibited the use of its financing programs for the purpose of wholesale lending, and for good reason.
Becaus lenders are limited in their ability to exercisse full control over thefinanced items, the exposurs to loss in floorplan loanx is greater than in other types of financing.”