What Is Floor Plan Financing

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

What is floor plan financing.

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. Retailers use a short term loan to purchase inventory items and the loan is repaid as inventory is sold. Floor planning is commonly used in new and used car dealerships.

These loans are made against a specific piece of collateral i e. Owning and operating a profitable dealership with efficient cash flow all comes down to balancing that cash flow with current inventory. Floor plan financing interest expense is interest paid or accrued on floor plan financing indebtedness. Floor plan financing indebtedness is indebtedness that is used to finance the acquisition of motor vehicles held for sale or lease and that is secured by the acquired inventory.

Lines of credit are customizable flexible and accessible throughout our expansive inventory sourcing network. When each piece of collateral is sold by the dealer the loan advance against that piece of collateral is repaid. Dealers can then use their floor plan line of credit to purchase inventory from auctions and other inventory sources. So they work with lenders who provide floor plan lines of credit for those vehicles financing through a lender that is secured by each vehicle and its vin number.

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. 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 if you own an automobile dealership and paid. Our floor plan financing options allow dealers to finance nearly any type of remarketed unit.

Much like a credit card a floor plan financing company extends a line of credit to a car dealer. 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. Floor plan financing is a revolving line of credit that allows the borrower to obtain financing for retail goods. Floor planning is a method of financing inventory purchases where a lender pays for assets that have been ordered by a distributor or retailer and is paid back from the proceeds from the sale of these items.