Floor Plan Lending Definition

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.

Floor plan lending definition.

Dealers can then use their floor plan line of credit to purchase inventory from auctions and other inventory sources. Advances under the facility are made against specific automobiles as collateral. Local dealerships purchase their inventories through financing called floor plan lending here s how it works. Floor planning is a type of inventory financing for large ticket retail items.

This booklet applies to the occ s supervision of national banks and federal savings associations. This booklet addresses the risks associated with floor plan lending and discusses risk management practices for floor plan lending. Financing the operations of a car dealership requires a specialized type of loan called a floor plan line of credit. The floor plan facility allows the automobile dealer to obtain financing for automobile inventory.

These loans are often secured by the inventory purchased as collateral. Much like a credit card a floor plan financing company extends a line of credit to a car dealer. When each automobile is sold the loan advance against that particular 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.

Supplementing working cash with a floor plan is a tried and true method to grow business. Local dealerships have a better sense than anyone what vehicles will sell best in their markets cars or trucks suv s or compacts sports cars luxury cars or more affordable models. Retailers use a short term loan to purchase inventory items and the loan is repaid as inventory is sold. Floor plan lending noun also known as wholesale lending a form of retail goods inventory financing in which each loan advance is made against a specific piece of collateral.

Find out how nextgear capital dealers are tackling the challenges of today s market head on by properly utilizing their lines of credit. 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.