GMAC cuts dealer financing while SBA gears up to provide it

As many as 90 Chrysler dealers who survived the recent purge are now confronting another challenge: GMAC is cutting off their financing.

GMAC, which replaced Chrysler Financial as dealers’ primary source of funding, has received applications from roughly 60 percent of the remaining Chrysler dealers and has rejected about six percent of them. The rejected dealers have 30 days to appeal.

The lender said tightened credit standards are the result of government concerns about past lending decisions in the mortgage market. When all the deals are done, the U.S. Treasury will own 35.4 percent of GMAC. Cerberus Capital Management, which once owned a majority of GMAC, now owns 22 percent.

Just in time for these dealers and others having difficulty obtaining financing, the Small Business Administration has relaxed its size limits for loans and is offering a Dealer Floorplan Program (DFP). Under the DFP, the SBA will offer dealers guarantees for lines of credit up to $2 million through its 7(a) loan program. The DFP pilot program will begin July 1 and will run through September 30, 2010, when the SBA will make a decision on extending the program.

For more information about the Dealer Floorplan Program, visit the Small Business Administration website.