Floor Plan Definition Finance

A floor plan is a method that a business such as an auto dealership can use to finance inventory that they are holding for resale without having to tie up their own capital in that inventory.

Floor plan definition finance.

Architectural drawings showing the layout of the floor s in a building locations of load bearing walls and or required fire walls dimensions for all walls locations and swings inward outward which side the hinges are on for all doors and locations of windows. The dealer then receives payment hopefully including a profit and remits the balance to. 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. In addition to freeing up the cash a dealer has on hand other floor plan financing benefits.

Impact of floor plan lending activities on a bank s risk profile and financial condition. For example automobile dealerships utilize floor plan financing to run their businesses. Floor planning is a method of financing inventory purchases where a lender pays for assets that have been ordered by a distributor or retailer and is paid back from the proceeds from the sale of these items. What you don t realize is that like most new car dealers a floor plan was used to finance the cars.

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. Floor plan finance companies are uniquely attuned to the needs of auto dealers. 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. This article reviews how you can manage floor plan financing with quickbooks.