Floor Plan Financing Explained

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.

Floor plan financing explained.

Let s say you make a profit of 3 000 per car sold. How does floor plan financing work specifically to benefit auto dealers. Floor plan finance options are popular within the automotive industry. However not all inventory finance companies offer retail and dealership wholesale financing options.

The arrangement is most commonly used when large assets such as automobiles or household appliances are involved. 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. The dealer then receives payment hopefully including a profit and remits the balance to the lender who in turn releases the title to the car to the new purchaser. With most commercial loans the collateral involved typically remains static.

When each piece of collateral is sold by the dealer the. Floor plan finance companies are uniquely attuned to the needs of auto dealers. For example a dealer might be able to borrow 10 million over the year to purchase 300 new cars. These floor plan finance formulas incorporated with your turn time can help to make or break your dealership s profitability.

These loans are made against a specific piece of collateral i e. 3 amount of the line. How does floor plan financing differ from other types of loans. An auto rv manufactured home etc.

Floor plan financing changes this dynamic to a certain degree giving borrowers more control over their collateral. 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 financing is a revolving line of credit that allows the borrower to obtain financing for retail goods.

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 loans are typically made with a one year term and based on an aggregate budget. The loans are often made with a one year term and based on an aggregate budget. For example automobile dealerships utilize floor plan financing to run their businesses.

Floor plan financing is also done for large appliances mobile homes and boats among other items and these products are usually sold to consumers with a financing contract.