Floor Plan Lending Definition

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

Floor plan lending definition.

Financing the operations of a car dealership requires a specialized type of loan called a floor plan line of credit. Dealers can then use their floor plan line of credit to purchase inventory from auctions and other inventory sources. Advances under the facility are made against specific automobiles as collateral. Floor plan lending noun also known as wholesale lending a form of retail goods inventory financing in which each loan advance is made against a specific piece of collateral.

When each automobile is sold the loan advance against that particular piece of collateral is repaid. 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. This booklet addresses the risks associated with floor plan lending and discusses risk management practices for floor plan lending. Find out how nextgear capital dealers are tackling the challenges of today s market head on by properly utilizing their lines of credit.

Floor planning is a type of inventory financing for large ticket retail items. Retailers use a short term loan to purchase inventory items and the loan is repaid as inventory is sold. Local dealerships purchase their inventories through financing called floor plan lending here s how it works. This booklet applies to the occ s supervision of national banks and federal savings associations.

These loans are often secured by the inventory purchased as collateral. Supplementing working cash with a floor plan is a tried and true method to grow business. The floor plan facility allows the automobile dealer to obtain financing for automobile inventory. How to pronounce floor plan lending.

Floor planning is commonly used in new and used car dealerships. Much like a credit card a floor plan financing company extends a line of credit to a car dealer.