Definition Of Floor Plan Financing

What you don t realize is that like most new car dealers a floor plan was used to finance the cars.

Definition of floor plan financing.

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. Floor plan financing is a revolving line of credit that allows the borrower to obtain financing for retail goods. Contrary to common perceptions most car dealers do not pay cash for the. The loans are often made with a one year term and based on an aggregate budget.

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. 3 amount of the line. These loans are made against a specific piece of collateral i e. Impact of floor plan lending activities on a bank s risk profile and financial condition.

Retail floor planning also referred to as floorplanning or inventory financing is a type of short term loan used by retailers to purchase high cost inventory such as automobiles these loans are often secured by the inventory purchased as collateral. For example automobile dealerships utilize floor plan financing to run their businesses. 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. 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.

How does floor plan financing work specifically to benefit auto dealers. The dealer then receives payment hopefully including a profit and remits the balance to. 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. For example a dealer might be able to borrow 10 million over the year to purchase 300.

Floor planning is commonly used in new and used car dealerships. 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 planning is a form of financing for large ticket items displayed on showroom floors. 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.

Floor plan synonyms floor plan pronunciation floor plan translation english dictionary definition of floor plan. However not all inventory finance companies offer retail and dealership wholesale financing options. When each piece of collateral is sold by the dealer the. Floor plan finance companies are uniquely attuned to the needs of auto dealers.