Floor Plan Loans Definition

When each automobile is sold the loan advance against that particular piece of collateral is repaid.

Floor plan loans definition. The loans are often made with a one year term and based on an aggregate budget. Retailers use a short term loan to purchase inventory items and the loan is repaid as inventory is sold. Floor plan finance companies are uniquely attuned to the needs of auto dealers. 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.

The dealer borrows against their retail inventory repays the. Understanding floor plan loans unlike most collateral on loans that is mostly static the retailer is in more control of the collateral under a floor planning arrangement and that makes it harder for the lender to control because it will fluctuate from day to day. Contrary to common perceptions most car dealers do not pay cash for the. These loans are made against a specific piece of collateral i e.

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. Advances under the facility are made against specific automobiles as collateral. For example a dealer might be able to borrow 10 million over the year to purchase 300. 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. Floor plan financing is a revolving line of credit that allows a dealership to obtain financing through sba s 7 a program for inventory that can be titled such as autos rvs manufactured homes boats and trailers. As each piece of collateral is sold by the dealer the loan advance against that piece of collateral is repaid. 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.

How does floor plan financing work specifically to benefit auto dealers. Floor planning is commonly used in new and used car dealerships. Floor plan financing is a revolving line of credit that allows the borrower to obtain financing for retail goods. Dealer floor plan financing frequently asked questions for borrowers and lenders what is floor plan financing.