Floor Plan Lending Risks

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 lending risks.

How does floor plan financing work specifically to benefit auto dealers. For example automobile dealerships utilize floor plan financing to run their businesses. Floor plan financing is a revolving line of credit that allows the borrower to obtain financing for retail goods. Impact of floor plan lending activities on a bank s risk profile and financial condition.

Loans for new and used unit inventory real estate construction and term loans working capital term loans and lines of credit. 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 finance companies are uniquely attuned to the needs of auto dealers. 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.

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. And are subject to risks including the possible loss of principal. Dealer floor plan financing frequently asked questions for borrowers and lenders what is floor plan financing. An auto rv manufactured home etc.

Using cash or a bank line of credit to purchase inventory can work for some car dealers but many floor plan financing companies offer a variety of dealer specific benefits. For dealerships that follow the rules floor planning can prove to be an excellent business agreement between the lender manufacturer and dealer. Provides an expanded examination procedures section and appendixes that include a glossary examples of risk rating cases and indicators for quantity of credit risk and quality of credit risk management. Floor planning is a form of financing for large ticket items displayed on showroom floors.

What does peoples offer as a floor plan lender. This booklet applies to the occ s supervision of national banks and federal savings associations. Peoples bancorp and. Items commonly financed through a floor plan facility are automobiles.

For dealer floor plan lenders however there can be quite a bit of risk involved as they don t have full control over the loan collateral the vehicles. The loans are often made with a one year term and based on an aggregate budget. Floor plan lending services efficiently maximize your working capital. Describes the risks associated with floor plan lending sound risk management practices and regulatory risk rating guidelines.