WASHINGTON - President Obama has signed legislation that will raise limits to $5 million on federally guaranteed loans available to thousands of small auto dealers as the administration attempts to loosen credit in a sputtering economy, reported Automotive News.

The previous floorplan financing limit in the U.S. Small Business Administration pilot program was $2 million.

The 17-month-old program hasn't gotten off the ground because banks, credit unions and other lenders have been reluctant to participate.

The Obama-backed bill, which contained provisions aimed at creating jobs as well as easing credit, passed the House and Senate over almost completely unified Republican opposition as the Nov. 2 congressional elections approach.

"We still need banks to lend," said Bailey Wood, spokesman for the National Automobile Dealers Association. "The fact is, many credit worthy dealers are still having a tough time getting the credit they need to purchase vehicle inventory."

The floorplan financing provision is part of a section that will raise loan limits for all qualified small businesses.

"It's a great victory for America's entrepreneurs," the president said.

Under the new law, the portion of each loan that is backed by the federal government will remain 75 percent.

The law waives lender fees to the government of as much as $54,000 on a $2 million loan, SBA spokesman Michael Stamler said. These fees can be passed on to dealers.

More than half the 18,000 dealerships in the United States will qualify as small businesses for the floorplan financing assistance, Wood said.

To qualify, dealerships must have average net income of less than $3 million after taxes and tangible net worth of $8.5 million or less, he said. Only 61 SBA-backed floorplan loans totaling $61 million have been approved for dealerships, Stamler said.

Lenders have cited government red tape and fees, their own staffing constraints and lack of familiarity with floorplan financing.

The SBA program, which began in May 2009, will expire in September 2013 under the new law.