The National Independent Automobile Dealers Association is calling on the Small Business Administration and Congress to open the Paycheck Protection Program to related finance companies of buy-here, pay-here dealers.
In separate letters sent Friday to congressional leaders, the Small Business Administration and the Senate Committee on Small Business and Entrepreneurship, NIADA CEO Steve Jordan argued that current guidance from the administration prohibits small finance companies from receiving loans from the Paycheck Protection Program — a crucial part of the $2 trillion Coronavirus Aid, Relief and Economic Security Act.
The CARES Act states “any business concern … which employs not more than 500 employees shall be eligible” for the paycheck protection loans. The association said dealerships are being approved for the loans but the related finance companies “are routinely denied, with lenders stating current SBA guidance prohibits finance companies” from receiving the payroll loans.
Specifically, many buy-here, pay-here dealers’ related finance companies are being denied the loans by banks and other lenders that cite the administration’s interim final rule released April 2, the association said.
“The banks are referring to page 7-8 of the rule, which cross-references to an administrative regulation and the SBA’s Standard Operating Procedure [Section 50, No. 10], as the basis for the denial,” said Shaun Petersen, the NIADA’s senior vice president of legal and government affairs. “Lenders are taking the position that those citations prohibit PPP loans to finance companies.”
The National Independent Automobile Dealers Association said in the letter the rule’s language contains “no qualifier for business concerns” to be eligible for the program’s loans other than having up to 500 employees. The association is asking the Small Business Administration to amend its rule so that all legal businesses with 500 or fewer employees are eligible for the loans.
“There is no reason for SBA to deem related finance companies ineligible based on what seems to be clear intent from Congress that they be included,” Petersen said. “After all, the overwhelming majority of them are a business concern with less than 500 employees.”
Automotive News has reached out to the Small Business Administration for additional comment.
“Across the country, BHPH dealers and their [related finance companies] are serving the transportation and financing needs of essential personnel battling on the front lines of [the] COVID-19 crisis, including medical personnel, first responders, supply chain workers, grocery store clerks and others,” Jordan said in the letter.
“But in order to keep those essential personnel driving to and from their much-needed jobs, both BHPH dealers and their RFCs need help in the form of liquidity to keep their employees on the payroll and the lights turned on,” he said. “They need to be eligible for Paycheck Protection Program loans as the CARES Act intended.”