Today, the SBA released further details of what it's now thinking of as a "pilot program" for dealerships, the Washington Post reports. The structure is kind of interesting on its own terms: it will allow dealerships to purchase inventory--the vehicles (and mobile homes) they sell--by borrowing against it. In other words, they obtain credit to buy cars, and then pay down their debt when they sell those cars (with the option of re-upping on their credit lines). They're calling it "floor plan financing". Clever!

As for the loans themselves? They must be between $500,000 and $2 million. They come due after five years. And, yes, they're 75% guaranteed by the feds. You didn't think these were direct loans, did you?

SBA Head Karen G. Mills was set to announce the plan today with the Obama administration's car-community czar in what is presumably the car-centric community of Kokomo, Indiana (and which is presumably not the Kokomo from that Beach Boys song). "Countless small businesses, including dealerships, across the country are facing significant challenges as a result of the uncertainty in the auto industry," said Mills in a statement.

Certainly you don't need to inform us that the Big Three's crashes (well, actually Ford is apparently doing okay) affect more than just the Big Three. Still, though, we're ambivalent. Certainly these places need help, but are indirect loans really the most efficient and productive way for the government to help them? And even as a congressman submits a bill that, for contracting purposes, would identify small businesses that are parts of larger companies as their parent companies, should the SBA's focus really be on helping dealerships that are linked to much larger companies? Are there no better government agencies for that, so that the SBA can keep its focus on truly independent small businesses?


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