Floor Plan Financing Requirements

If this dealer s holding cost per day per unit is 44 63 and their turn time to sell a car is 60 days they will spend 2677 of their profit holding on. As the cost of the inventory rises the dealer s floor plan requirements also rise increasing the amount of capital needed to operate. This type of inventory financing becomes an important source of capital that a bank can provide to the dealer.

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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.

Floor plan financing requirements.

These floor plan finance formulas incorporated with a dealer s turn time can help to make or break a dealership s profitability. Yet while there is a good chance you will be able to acquire a floor plan line of credit the size of that line of credit will vary depending on your business needs and overall portfolio snapshot. A floor plan borrower typically has stronger asset liquidity than other commercial. If your holding cost per day per unit is 44 63 and your turn time is 60 days you will spend 2677 of your profit holding on to a non selling car.

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. The basics first and foremost to qualify for a floor plan you need to have credit. 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. Let s say a dealer makes a profit of 3000 per car sold.

The arrangement is most commonly used when large assets such as automobiles or household appliances are involved. These floor plan finance formulas incorporated with your turn time can help to make or break your dealership s profitability. Let s say you make a profit of 3 000 per car sold.

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