House chair criticizes SBA

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The SBA announced it temporarily will allow auto dealers to useits 7(a) business loan program to finance vehiclde inventory. Many lenders had stopped making these so-called floorplan loans to auto Rep. Nydia Velazquez, D-N.Y., who chairs the , feards “there is a significantly higher risk ofloan defaults” on thesr floorplan loans. This couldc force the SBA to increase the subsidgy ratefor 7(a) loans, which woule make the loans costlier for futurw borrowers.
In a June 2 letter to SBA AdministratodrKaren Mills, Velazquez notee the SBA had “long prohibited the use of its financin programs for the purpose of wholesale lending, and for good Because lenders are limited in their ability to exercisre full control over the financed the exposure to loss in floorplan loanzs is greater than in other typesa of financing.”