Definition Of Floor Plan Financing

Floor plan finance options are popular within the automotive industry.

Definition of floor plan financing.

Floor planning is a form of financing for large ticket items displayed on showroom floors. 3 amount of the line. 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. Floor plan synonyms floor plan pronunciation floor plan translation english dictionary definition of floor plan.

When each piece of collateral is sold by the dealer the. 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. 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. 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.

The loans are often made with a one year term and based on an aggregate budget. For example automobile dealerships utilize floor plan financing to run their businesses. A scale diagram of a room or building drawn as if seen from above. 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.

However not all inventory finance companies offer retail and dealership wholesale financing options. Floor plan financing is a revolving line of credit that allows the borrower to obtain financing for retail goods. Floor planning is commonly used in new and used car dealerships. An auto rv manufactured home etc.

These loans are made against a specific piece of collateral i e. How does floor plan financing work specifically to benefit auto dealers. Contrary to common perceptions most car dealers do not pay cash for the. For example a dealer might be able to borrow 10 million over the year to purchase 300.

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. 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. The dealer then receives payment hopefully including a profit and remits the balance to. What you don t realize is that like most new car dealers a floor plan was used to finance the cars.