Comments on: SBA rules discriminate against RV dealerships

By: Eric

Eric — Sat, 26 Jan 2008 06:11:26 +0000

Eric…

Thanks for this, I’m writing an ebook about starting up businesses right now so this post was very informative….

By: ggerber

ggerber — Sun, 21 Oct 2007 18:41:28 +0000

Jerry from Hotlanta,

Maybe you should sit back and relax. I challenge you to point out where I called the SBA loan program looney.

You’ll also note that I admitted to being an “idiot editor with limited business sense,” so I’ll agree that my understanding of how business lending works is truly zilch. So, with will all your experience working at SCORE, rather than sucking up to your pals at the SBA, please show me, and our readers, what was actually wrong with the example I gave.

My point is still valid — that this federal agency discriminates against various types of businesses based on very subjective standards. The SBA calls an RV dealership a “big business” simply because they sell 43 $150,000 motorhomes a year — and that determination eliminates them from SBA loan guarantees.

Yet, this same agency feels that a construction company building 206 $150,000 stick homes is still a “small business.”

The whole point of this article is not about the validity of this particular loan — it’s about how Small Business Administration subjectively treats one business differently from another. I’d expect more from a government build on the foundation of “equality for all.”

By: Hot Lanta

Hot Lanta — Fri, 19 Oct 2007 18:19:14 +0000

First, my appreciation to Mike Stamler for his reply. Note that he is a savvy SBA public information officer. Also notable, is that the author’s understanding of how business lending works and knowledge of the subject deal is zilch, nada, bupkis! So I would suggest that before he call SBA’s guaranty program “loony,” he brush up on the program and deal-points involved.

By: Mark

Mark — Fri, 19 Oct 2007 16:51:19 +0000

This is why repurchase agreements are in place, to help mitigate some of the risk. In fact, the repurchase agreements are much better and less expensive than an SBA deal. The manufacturers know that these repurchase agreements help in these types of situations which helps them sell more units.

By: ggerber

ggerber — Wed, 17 Oct 2007 19:33:38 +0000

Mike,

Perhaps you could explain why the SBA considers a construction company doing $31 million in business to be a “small business?” Why are special trade contractors with $13 million in annual revenues considered a “small business?” Why are manufacturing companies employing 500 people considered “small business?”

All of these firms are entitled to loan guarantees from the Small Business Administration. But an RV dealer that sells three RVs a week comes perilously close to being considered “big business.” It doesn’t make sense.

My point is that the SBA is very subjective in determining what is and is not a small business. In this industry it is possible that an RV manufacturer, or even a dealer, could sell six RVs to ultra high-end customers and make more than $6.5 million in annual sales.

You can’t be serious that selling six motorhomes a year makes a company a “big business.”

By: Randall Jeremiah

Randall Jeremiah — Wed, 17 Oct 2007 18:42:40 +0000

I would suggest that the government should not be in the business co-signing for loans. I have been brought up believing that co-signing is not a good thing. I would also suggest that if everything was as strong as is suggested here that the bank would loan the money with out a problem. Remember banks loan money based on how much you need it. The less you need it the more they will loan to you. If the company is doing that good then they would like to do that. they are in this for profit as well. The only one who does not care about profit is the government which is what this article is saying we depend on as small business.

Our business has never used the SBA nor will we. We have made it the hard way through work and success.

By: BrianH

BrianH — Wed, 17 Oct 2007 12:56:10 +0000

You have to draw the line somewhere. I think the SBA acted appropriately in this case. There ought to be plenty of other sources of private venture capital for a deal this good. All the prospective buyer needs to do is go looking for them. An accepted offer and a good business plan in hand is all he should need.

By: Mark Primeaux

Mark Primeaux — Tue, 16 Oct 2007 19:34:13 +0000

That particular loan makes sense as it is described to us but normally business lenders want to see 3-5 years of gross and net income and they will take an average income in which to base their decision regarding the loan.

In the current marketplace, there are RV dealers all over the country that sold units to FEMA which affects their year-over-year sales. This means a dealer with $13.5 million in sales and a $440K net for 2006 could of easily had $6 million the year before with a $100K net. This why it is important to know the whole story with all the details.

As for the RV buyer you spoke about, if the year-over-year net income averages somewhere close to $440K, then he should broaden his range of lenders to find an educated commercial lender.

The other variable is the strength and background of the buyer. Not just anyone can get the $4 million credit line required to facilitate a business with $13.5 million in sales. Floorplan companies want to see some experience and $$$ in the bank.

By: Mike Stamler

Mike Stamler — Tue, 16 Oct 2007 18:48:21 +0000

Well, the fact is, the decision is not based on the economics of the deal. If the economics of the loan were so clear-cut and perfect, then the bank would be able to do the loan without any SBA enhancement. In fact, the bank would prefer to do it without SBA assistance, so it could collect all the fees itself, instead of having to forward them to the SBA.

The fact is, at $13.5 million a year in revenues, it’s just not a small business anymore, and the law does not allow the SBA to provide a loan guarantee for a business that’s not small.

Simple as that.