What Is Floor Plan Financing

Floor planning is a type of inventory financing for large ticket retail items.

What is floor plan financing.

Floor plan financing indebtedness is indebtedness that is used to finance the acquisition of motor vehicles held for sale or lease and that is secured by the acquired inventory. Much like a credit card a floor plan financing company extends a line of credit to a car dealer. 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. For example if you own an automobile dealership and paid.

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. Lines of credit are customizable flexible and accessible throughout our expansive inventory sourcing network. The arrangement is most commonly used when large assets such as automobiles or household appliances are involved. These loans are often secured by the inventory purchased as collateral.

Owning and operating a profitable dealership with efficient cash flow all comes down to balancing that cash flow with current inventory. Floor plan financing interest expense is interest paid or accrued on floor plan financing indebtedness. These loans are made against a specific piece of collateral i e. Working through these three floor plan finance formulas periodically and monitoring these three metrics is essential to ensuring the overall balance of inventory and cash flow in your dealership.

When each piece of collateral is sold by the dealer the loan advance against that piece of collateral is repaid. Retailers use a short term loan to purchase inventory items and the loan is repaid as inventory is sold. An auto rv manufactured home etc. Our floor plan financing options allow dealers to finance nearly any type of remarketed unit.

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. Floor planning is commonly used in new and used car dealerships. Dealers can then use their floor plan line of credit to purchase inventory from auctions and other inventory sources. Floor plan financing is a revolving line of credit that allows the borrower to obtain financing for retail goods.