An emergency covid-19 relief loan for the automotive industry is desperately needed.
Like a thief in the night, the coronavirus has robbed many of us of our health, freedom, jobs, buying power, and a stable economy. Not only has the virus plunged our country into a serious health crisis, but it has also plunged our economy into a recession.
Even though every sector has been hard-hit by the pandemic, one particular industry is starting to feel the pinch…the automotive industry.
Consumer confidence is at an all-time low, especially with so many lay-offs and social distancing measures. The last thing on the mind of cautious consumers is to invest thousands of their limited cash reserves on a vehicle.
According to J.D. Power, the March 2020 forecast for car sales will show a drop of 41% from one year ago. Morgan Stanley also indicated a “demand shock” to plunge U.S. auto sales by 9% this year.
Auto Industry Given The Cold Shoulder?
The much-lauded and welcomed relief came when the $2 trillion stimulus bill was passed by Washington. However, even with repeated requests for a share of the wealth, the automakers were given the brush-off. Instead the funds were distributed as follows: $150 billion for hospitals, $50 billion-worth in loans for airlines, $25 billion for transit, and $10 billion for airports.
Despite the fact that the auto industry didn’t receive a designated cut of the funds, they were advised by lawmakers that they could apply for assistance through a $500 billion program for loans to “distressed companies”. These “corporate loans” will be valid for eight weeks and can be turned into grants if businesses can demonstrate that they have allocated the money solely for the operating expenses necessary to keep the lights on.
The Only Known Relief For Auto Industry At This Time
Currently, the only funds that have been made available for auto dealers is the Paycheck Protection Program (PPP).
The Small Business Administration (SBA), who offered the first roll out of the $349 billion in funding and has since run out, is accepting applications for the second phase of funding (Congress approved another $310 billion).
The PPP offers assistance beyond its main goal of assistance, which is to fulfill payroll. It caters to businesses with 500 or less employees. If you happen to be part of a larger dealership group, where the staff exceeds that number, the group cannot apply for this loan unless they get a waiver.
Dealers who do fall under the employment criteria must possess a Franchise Identifier Code (FIC) that is provided by the automaker they work with.
Under the program, auto dealers are eligible to borrow up to $10 million or, “ 2.5 times your average monthly payroll costs for the 12 months prior to the date of the loan, whichever is less.”
If specific conditions are met, a portion or the loan in its entirety could be forgiven. The SBA specifies the amount for the loan forgiveness on your costs.
To apply, borrowers can fill out an online application form and then take it to any SBA-approved lender or any federally insured bank or credit union that is participating in the program.
Sound The SOS Distress Signal
As for the rest of the automotive industry, things are looking quite grim. Car factories and dealerships have been shut down. Lockdowns have turned into layoffs and other non-essential businesses had to close their doors as well.
Meanwhile, the automotive industry continues to lobby in Washington for urgently needed initiatives to help them weather the brutal economic storm.