Temporary change in the size standard for the agency’s 7(a) loan program means more credit now available to marine industry
The Small Business Administration (SBA) has taken an important step toward making more credit available to marine dealers, announcing an increase in the eligibility of its 7(a) guaranteed loans. The SBA will adopt a change in its size standard for 7(a) loans, allowing a small business to qualify based on net worth and average income.
The alternate size standard will temporarily replace the SBA’s traditional size standard for 7(a) loans, which varied by industry. For the marine industry, this meant a marine dealer would only be eligible for the SBA 7(a) loan program if they had total annual receipts less than $7 million and a boat manufacturer would only qualify if it had less than 500 employees, making many ineligible.
The new alternate standard expands the eligibility for 7(a) loans and better reflects the true size of a business instead of relying on a dealer’s annual receipts. As a result, a marine dealer can now qualify for SBA 7(a) loans that can be used for working capital and the refinancing of existing debt if it meets the following:
1. A tangible net worth not in excess of $8.5 million (including its affiliates); and
2. Average net income after federal income taxes (excluding any carry-over losses) for the preceding two completed fiscal years not in excess of $3 million.
The temporary change in the 7(a) loan program size standard will last until September 30, 2010.
“The expansion in the SBA’s loan eligibility requirements is another positive step forward in helping marine dealers secure much needed access to capital, though more work remains to be done,” noted NMMA president Thom Dammrich. “It’s critical we continue voicing our concerns for the marine industry on Capitol Hill to ensure dealers and manufacturers have the resources needed to conduct business and sell boats.”
Currently, SBA 7(a) loans cannot be used for floorplan financing. NMMA and the National Marine Bankers Association are working closely with the SBA to develop a program for SBA 7(a) floorplan loans.
NMMA commends the new SBA administrator Karen Gordon Mills for her leadership in expanding opportunities for the marine industry to access critically needed credit.