Your Guide to Dealer Floor Plan Financing
Floor planning – noun. /ˈflô(ə)r ˌplaniNG/
Floor planning is defined as a form of financing for large ticket items displayed on showroom floors or lots. These short-term loans allow dealers to purchase items upfront and then repay as the items are sold.
What Is a Floor Plan?
A floor plan is a type of financing which acts as a revolving line of credit or short-term loan given to a business to purchase inventory. If a dealer wants to purchase inventory they can use their floor plan line of credit whether they are at an auction, taking in a trade, or through any other source of purchasing inventory. This type of financing is beneficial for businesses that experience fluctuations in cash flow and need to acquire extra inventory before busy seasonal periods.
How Does Floor Planning Work for a Dealership?
Automobile dealerships use floor plan financing to acquire inventory. If a dealer wants to purchase cars at an auction or outside an auction to fill their lot, they can take a loan or line of credit from the floor plan finance company to buy those cars. The dealership then repays the lender when the vehicle is sold or the loan matures, whichever comes first.
The auto industry has dealerships of every shape and size which have unique needs and customer bases. Financers that offer floor plan financing, like Floorplan Xpress, can often customize the terms of an agreement to meet the needs of the car dealer.
Floor Planning Costs, Interest Rates & Curtailment
Costs around dealer financing often include, but may not be limited to the following:
- Inventory audits
- Title fees
- Application fees
- Unit fees
- Shipping fees
- Non Auction Purchase fees
- Title check out fee
- Extension fees
The length of time a car dealer is given to sell a vehicle before some type of payment is required. Many floor plan companies offer 30-day or 45-day curtailments. Floorplan Xpress offers 90 day curtailments, allowing you the flexibility you need to keep your money in your bank account.
What Is Floor Plan Financing?
Within the auto industry, floor plan financing allows car dealerships to buy and sell vehicles quickly without worrying about disruptions to cash flow. Here’s the basic idea:
A dealership receives a short-term loan or revolving line of credit from a floor plan financing company like Floorplan Xpress.
As the dealership sells vehicles, they repay the loaned money (plus interest and fees!).
Because demand for vehicles shifts with the seasons, floor plan financing is a fantastic way for dealerships to gain fast and flexible financing and make a steady profit.
Floor Plan Financing Requirements
Dealerships need to have a level of organization and experience in order to be successful with floor plan financing. While each dealership is evaluated individually by finance experts before being offered a floor plan agreement, there are many factors which are taken into consideration. Some of the general considerations are:
- Active dealers license
- Good credit history
- Sufficient capital
- Dealership ownership experience
- Time in business
- Current financial obligations
Who Uses Floor Plan Financing?
- Small Dealership
- Large Dealership
- Dealerships who travel to purchase inventory
- Dealerships looking to expand their business
- Dealerships wanting to grow
- Dealerships seeking to add more inventory
How Do You Get Approved for a Floor Plan?
We’re Here as a Resource for Dealers
If you’d like to learn more about floor plan financing and how it works for car dealers like you, we’d love to talk!
Your local Floorplan Xpress team can help you get started today.