Manufacturers Seek $20 Billion in Loan Guarantees from TALF
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By Mark Drajem

Aug. 25 (Bloomberg) -- The Obama administration should consider $20 billion in loan guarantees for small manufacturers cut out of credit markets, a private-industry advisory panel to the U.S. Commerce Department said.

The council, 14 executives representing General Dynamics Corp., Nucor Corp. and other companies, said small and medium “middle market” manufactures can’t get loans to fund day-to- day operations or investments. The group said it wants the government to provide individual guarantees of as much as $10 million under the Term Asset-Backed Securities Loan Facility.

“These are extraordinary circumstances that require immediate action and we cannot wait any longer for the manufacturing credit crisis to resolve itself,” the council said in a draft letter it plans to send to Commerce Secretary Gary Locke today.

Banks are turning away small manufacturers seeking loans, and Small Business Administration funding programs aren’t being used because of “stringent requirements,” the council said. The inability for these companies to obtain financing may undermine an economic recovery, the group said in the letter.

The government guarantee would be 90 percent for loans of as much as $2.5 million, and as low as 70 percent for loans of $5 million to $10 million, according to the letter.

“We need to rebalance our manufacturing financing system to open up credit to those that are traditionally healthy but temporarily impaired,” the group said.

Under TALF, the Federal Reserve provides low-cost loans to investors to buy AAA rated securities backed by automobile, credit-card, equipment, education and other kinds of loans. The Obama administration is counting on the $1 trillion program as a cornerstone of plans to revive credit and end the recession.

Fred Keller, chief executive officer of Cascade Engineering, is chairman of the Manufacturing Council. Other members include Daniel W. Holmes Jr., chairman of Morrison Products Inc., and Harding Stowe, CEO of R.L. Stowe Mills Inc.

To contact the reporter on this story: Mark Drajem in Washington at mdrajem@bloomberg.net

Last Updated: August 25, 2009 11:10 EDT
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Oops. Guess they forgot to water the green shoots this summer.

Banks will be convinced to start lending.

A scandal involving young boys in peru and the C-level execs of major banks should do the trick...

I said it in last fall and I'll say it again. A properly capitalized business does not need credit to fund day-to-day operations. A business that does need credit to sustain day-to-day operations is a akin to a household that can't put food on the table w/o charging it on their credit cards. Both are effectively insolvent.

-Uwe-

Uwe wrote..

I said it in last fall and I'll say it again. A properly capitalized business does not need credit to fund day-to-day operations

Yep.

A major reason I have been able to continue operations in 3 small bricks and mortar operations for over 30 years. I have never believed in carrying debt.

Hell, now I don't even purchase on account with ordinary payables.

After one lengthy downturn almost putting me under thru debt to suppliers/advertisers, etc., what I would consider standard payables - I then implemented pay in advance for supplies, advertising, whatever - and run no accounts.

You run a tighter, leaner more viable operation on cash _grin_

I also often negotiate a better purchase price paying in advance.

Swing,

Do you run your receivables buckets on cash only in advance as well?