Floor Plan Financing Requirements

Let s say you make a profit of 3 000 per car sold.

Floor plan financing requirements.

The basics first and foremost to qualify for a floor plan you need to have credit. 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. 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. 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.

These floor plan finance formulas incorporated with a dealer s turn time can help to make or break a dealership s profitability. 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. 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.

This type of inventory financing becomes an important source of capital that a bank can provide to the dealer. As the cost of the inventory rises the dealer s floor plan requirements also rise increasing the amount of capital needed to operate. 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.