Floor Plan Lending Definition

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.

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. These loans are often secured by the inventory purchased as collateral. Floor planning is a type of inventory financing for large ticket retail items. When each automobile is sold the loan advance against that particular piece of collateral is repaid.

Much like a credit card a floor plan financing company extends a line of credit to a car dealer. This booklet applies to the occ s supervision of national banks and federal savings associations. Supplementing working cash with a floor plan is a tried and true method to grow business. Financing the operations of a car dealership requires a specialized type of loan called a floor plan line of credit.

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. This booklet addresses the risks associated with floor plan lending and discusses risk management practices for floor plan lending. 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.

Local dealerships purchase their inventories through financing called floor plan lending here s how it works. Floor planning is commonly used in new and used car dealerships. Dealers can then use their floor plan line of credit to purchase inventory from auctions and other inventory sources. How to pronounce floor plan lending.

Advances under the facility are made against specific automobiles as collateral. 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.