Definition Of Floor Plan Financing

Floor plan finance options are popular within the automotive industry.

Definition of floor plan financing.

3 amount of the line. 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. A scale diagram of a room or building drawn as if seen from above. 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.

However not all inventory finance companies offer retail and dealership wholesale financing options. 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. For example automobile dealerships utilize floor plan financing to run their businesses. 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.

An auto rv manufactured home etc. When each piece of collateral is sold by the dealer the. Floor plan financing is a revolving line of credit that allows the borrower to obtain financing for retail goods. 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 planning is commonly used in new and used car dealerships. Floor planning is a form of financing for large ticket items displayed on showroom floors. Floor plan finance companies are uniquely attuned to the needs of auto dealers. 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.

How does floor plan financing work specifically to benefit auto dealers. Contrary to common perceptions most car dealers do not pay cash for the. Impact of floor plan lending activities on a bank s risk profile and financial condition. What you don t realize is that like most new car dealers a floor plan was used to finance the cars.

The loans are often made with a one year term and based on an aggregate budget. 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. 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.