Floor Plan Definition Finance

The arrangement is most commonly used when large assets such as automobiles or household appliances are involved.

Floor plan definition finance.

For example automobile dealerships utilize floor plan financing to run their businesses. With floor plan financing you will work with a third party financing institution a floor plan financing company to. What you don t realize is that like most new car dealers a floor plan was used to finance the cars. 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.

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. Floor planning is a form of financing for large ticket items displayed on showroom floors. 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. The dealer then receives payment hopefully including a profit and remits the balance to.

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 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. Impact of floor plan lending activities on a bank s risk profile and financial condition. In addition to freeing up the cash a dealer has on hand other floor plan financing benefits.