President Obama has signed into law yesterday, a piece of legislation that will raise the limit on federally guaranteed loans made available to thousands of auto dealers, to $5 million, in an attempt to loosen credit in the abysmal economy. The amount previously available to dealers was capped at $2 million.
The bill, which also contained provisions for creating jobs, was backed by Obama and passed both chambers despite almost unanimous Republican opposition. While this is a great step by the government toward easing the credit, it is just a start.
“We still need banks to lend,” said Bailey Wood, spokesman for the National Automobile Dealers Association. “The fact is, many credit worthy dealers are still having a tough time getting the credit they need to purchase vehicle inventory.”
The bill is more expansive than the automotive industry, as loan limits will be raised for all qualified small businesses, and will increase the portion guaranteed by the federal government from 75% to 90%, while decreasing the lender fees taken by the government, which equates to savings on the loan to pass on to dealers and other small business owners.
– By: Stephen Calogera