Flooring Finance Definition

They are most frequently taken out for periods of between 2 and 5 years although this can vary considerably.

Flooring finance definition. An interest rate cap is a derivative in which the buyer receives payments at the end of each period in which the interest rate exceeds the agreed strike price an example of a cap would be an agreement to receive a payment for each month the libor rate exceeds 2 5. Floor planning is a type of inventory financing for large ticket retail items. Also the price at which a stop order is activated when the price drops low enough to activate such an order. It is often referred to in the it industry regarding credit lines for computer equipment.

A floor in finance may refer to several things including the lowest acceptable limit the lowest guaranteed limit or the physical space where trading occurs. Floor plan finance companies are uniquely attuned to the needs of auto dealers. The dealer then receives payment hopefully including a profit and remits the balance to. Retailers use a short term loan to purchase inventory items and the loan is repaid as inventory is sold.

In addition to freeing up the cash a dealer has on hand other floor plan financing benefits. What you don t realize is that like most new car dealers a floor plan was used to finance the cars. Floor the area of a stock exchange where active trading occurs. 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.

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.