What Is A Floor Plan Loan

Floor plan loans typically require that all collateral vehicles on the floor plan loan must be paid off at the end of the one year term of the floor plan loan.

What is a floor plan loan.

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. This booklet addresses the risks associated with floor plan lending and discusses risk management practices for floor plan lending. Retailers use a short term loan to purchase inventory items and the loan is repaid as inventory is sold.

The floor plan facility allows the automobile dealer to obtain financing for automobile inventory. An auto rv manufactured home etc. 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. Contrary to common perceptions most car dealers do not pay cash for the.

The dealer borrows against their retail inventory repays the. Advances under the facility are made against specific automobiles as collateral. Floor planning is a type of inventory financing for large ticket retail items. The loans are often made with a one year term and based on an aggregate budget.

For example a dealer might be able to borrow 10 million over the year to purchase 300. Also if inventory financed by a floor plan loan is moving slower than expected the lender may ask for payment from the dealer for interest and possible depreciation of its collateral. Dealer floor plan financing frequently asked questions for borrowers and lenders what is floor plan financing. Items commonly financed through a floor plan facility are automobiles trucks recreational vehicles boats construction equipment agricultural equipment manufactured homes.

This booklet applies to the occ s supervision of national banks and federal savings associations. 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. And in a soft economy that can pose a serious problem both for the lender and the retailer. Floor planning is commonly used in new and used car dealerships.

This is in keeping with the common banking practice that all credit lines are required to be completely cleared at least once a year. How does floor plan financing work specifically to benefit auto dealers. Floor plan financing is a revolving line of credit that allows the borrower to obtain financing for retail goods.