Floor Plan Lending Risks

Peoples bancorp and.

Floor plan lending risks.

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. Floor planning is a form of financing for large ticket items displayed on showroom floors. 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. How does floor plan financing work specifically to benefit auto dealers.

Floor plan finance companies are uniquely attuned to the needs of auto dealers. For dealer floor plan lenders however there can be quite a bit of risk involved as they don t have full control over the loan collateral the vehicles. And are subject to risks including the possible loss of principal. Describes the risks associated with floor plan lending sound risk management practices and regulatory risk rating guidelines.

Floor plan lending services efficiently maximize your working capital. Floor plan lenders include local and regional banks large national banks and financing companies owned by the manufacturing companies like toyota financial or ford credit. Impact of floor plan lending activities on a bank s risk profile and financial condition. For example automobile dealerships utilize floor plan financing to run their businesses.

Items commonly financed through a floor plan facility are automobiles. The loans are often made with a one year term and based on an aggregate budget. 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. This booklet addresses the risks associated with floor plan lending and discusses risk management practices for floor plan lending.

Floor plan financing is a revolving line of credit that allows the borrower to obtain financing for retail goods. What does peoples offer as a floor plan lender. These loans are made against a specific piece of collateral i e. For example a dealer might be able to borrow 10 million over the year to purchase 300.

For dealerships that follow the rules floor planning can prove to be an excellent business agreement between the lender manufacturer and dealer. This booklet applies to the occ s supervision of national banks and federal savings associations. Loans for new and used unit inventory real estate construction and term loans working capital term loans and lines of credit. An auto rv manufactured home etc.