Floor Plan Loan Definition

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

Floor plan loan definition. Advances under the facility are made against specific automobiles as collateral. How does floor plan financing work specifically to benefit 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. 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.

From utilizing auto dealer floor plans to stocking seasonal inventory tips for managing a successful lot are only a click away. Floor planning is commonly used in new and used car dealerships. 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. Retailers use a short term loan to purchase inventory items and the loan is repaid as inventory is sold.

For example a dealer might be able to borrow 10 million over the year to purchase 300. Contrary to common perceptions most car dealers do not pay cash for the. 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. 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 finance companies are uniquely attuned to the needs of auto dealers. The floor plan facility allows the automobile dealer to obtain financing for automobile inventory. When each automobile is sold the loan advance against that particular piece of collateral is repaid. Items commonly financed through a floor plan facility are automobiles trucks recreational vehicles boats construction equipment agricultural equipment manufactured homes.

The loans are often made with a one year term and based on an aggregate budget. 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. Case studies supplementing working cash with a floor plan is a tried and true method to grow business. Floor plan loans typically require that interest on the outstanding balance be paid monthly.