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. 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. Floor plan financing is a revolving line of credit that allows the borrower to obtain financing for retail goods. Peoples bancorp and.

This booklet addresses the risks associated with floor plan lending and discusses risk management practices for floor plan lending. Floor planning is a form of financing for large ticket items displayed on showroom floors. These loans are made against a specific piece of collateral i e. And are subject to risks including the possible loss of principal.

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. The loans are often made with a one year term and based on an aggregate budget. For example a dealer might be able to borrow 10 million over the year to purchase 300. Loans for new and used unit inventory real estate construction and term loans working capital term loans and lines of credit.

Floor plan lending services efficiently maximize your working capital. How does floor plan financing work specifically to benefit auto dealers. Describes the risks associated with floor plan lending sound risk management practices and regulatory risk rating guidelines. Dealer floor plan financing frequently asked questions for borrowers and lenders what is floor plan financing.

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 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. For dealerships that follow the rules floor planning can prove to be an excellent business agreement between the lender manufacturer and dealer. What does peoples offer as a floor plan lender.

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. Items commonly financed through a floor plan facility are automobiles. This booklet applies to the occ s supervision of national banks and federal savings associations.