Floor Plan Lending Definition

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

Floor plan lending definition.

This booklet addresses the risks associated with floor plan lending and discusses risk management practices for floor plan lending. 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. Find out how nextgear capital dealers are tackling the challenges of today s market head on by properly utilizing their lines of credit. 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. The floor plan facility allows the automobile dealer to obtain financing for automobile inventory. Local dealerships purchase their inventories through financing called floor plan lending here s how it works. These loans are often secured by the inventory purchased as collateral.

How to pronounce 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. 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. Supplementing working cash with a floor plan is a tried and true method to grow business.

What you don t realize is that like most new car dealers a floor plan was used to finance the cars. 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 planning is commonly used in new and used car dealerships. When each automobile is sold the loan advance against that particular piece of collateral is repaid.

Retailers use a short term loan to purchase inventory items and the loan is repaid as inventory is sold. 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.