Floor Plan Definition Finance

What you don t realize is that like most new car dealers a floor plan was used to finance the cars.

Floor plan definition finance. A floor plan is a method that a business such as an auto dealership can use to finance inventory that they are holding for resale without having to tie up their own capital in that inventory. Floor planning is a method of financing inventory purchases where a lender pays for assets that have been ordered by a distributor or retailer and is paid back from the proceeds from the sale of these items. The dealer then receives payment hopefully including a profit and remits the balance to. With floor plan financing you will work with a third party financing institution a floor plan financing company to.

For example automobile dealerships utilize floor plan financing to run their businesses. 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. 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.

Impact of floor plan lending activities on a bank s risk profile and financial condition. Floor planning is a form of financing for large ticket items displayed on showroom floors. Architectural drawings showing the layout of the floor s in a building locations of load bearing walls and or required fire walls dimensions for all walls locations and swings inward outward which side the hinges are on for all doors and locations of windows. In addition to freeing up the cash a dealer has on hand other floor plan financing benefits.