Floor Plan Financing Definition

Impact of floor plan lending activities on a bank s risk profile and financial condition.

Floor plan financing definition. Floor planning is a form of financing for large ticket items displayed on showroom floors. 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. An auto rv manufactured home etc. What you don t realize is that like most new car dealers a floor plan was used to finance the cars.

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. How does floor plan financing work specifically to benefit auto dealers. Case studies supplementing working cash with a floor plan is a tried and true method to grow business.

When each piece of collateral is sold by the dealer the. Floor plan finance companies are uniquely attuned to the needs of auto dealers. Floor plan financing interest expense. 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.

Floor plan financing is a revolving line of credit that allows the borrower to obtain financing for retail goods. Floor plan financing interest expense is not subject to the section 163 j limitation. Definition of floor plan financing interest expense following the changes made to the statute discussed above the proposed regulations provide that certain business interest expense paid or accrued on indebtedness used to acquire an inventory of motor vehicles is deductible without regard to the irc 163 j limitation. From utilizing auto dealer floor plans to stocking seasonal inventory tips for managing a successful lot are only a click away.

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. Contrary to common perceptions most car dealers do not pay cash for the. Floor plan financing interest expense is interest on debt used to finance the acquisition of motor vehicles held for sale or lease where the debt is secured by the acquired inventory. The dealer then receives payment hopefully including a profit and remits the balance to.

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. For example a dealer might be able to borrow 10 million over the year to purchase 300.