Definition Of Floor Plan Financing

Impact of floor plan lending activities on a bank s risk profile and financial condition.

Definition of floor plan financing.

An auto rv manufactured home etc. The loans are often made with a one year term and based on an aggregate budget. Floor plan lenders include local and regional banks large national banks and financing companies owned by the manufacturing companies like toyota financial or ford credit. Floor plan finance companies are uniquely attuned to the needs of auto dealers.

These loans are made against a specific piece of collateral i e. Using cash or a bank line of credit to purchase inventory can work for some car dealers but many floor plan financing companies offer a variety of dealer specific benefits. For example automobile dealerships utilize floor plan financing to run their businesses. Floor plan finance options are popular within the automotive industry.

3 amount of the line. The dealer then receives payment hopefully including a profit and remits the balance to. How does floor plan financing work specifically to benefit auto dealers. Floor planning is commonly used in new and used car dealerships.

Floor plan financing is a revolving line of credit that allows the borrower to obtain financing for retail goods. What you don t realize is that like most new car dealers a floor plan was used to finance the cars. However not all inventory finance companies offer retail and dealership wholesale financing options. Floor plan lending is a form of inventory financing for a dealer of consumer or commercial goods in which each loan advance is made against a specific piece of collateral.

When each piece of collateral is sold by the dealer the. While some lenders are unable to properly serve independent dealers nextgear capital has proudly served the independent dealer market for over ten years our floor plan financing options allow dealers to finance nearly any. Contrary to common perceptions most car dealers do not pay cash for the. A good rule of thumb is new car floor plans that allow for 90 days of inventory and used floor plan lines that allow for 60 days of inventory.

Like any other financing facility the line must fit the financing needs of the borrower with some restraints to avoid excessive leveraging or over extension. A scale diagram of a room or building drawn as if seen from above. Floor planning is a form of financing for large ticket items displayed on showroom floors. Simply it is a way for an auto dealer to use a lender s funds to finance the cars and until each of them is sold the lender holds title to the cars.