Floor plan financing or wholesale financing is a revolving line of credit that allows the dealer to obtain financing for their vehicle purchases. These loans are made against a specific piece of collateral (i.e. an auto, RV, etc). The cost of the vehicle is applied to the dealer’s line of credit. When each unit is sold by the dealer, the loan against that collateral is repaid. Lenders assess interest and various fees in exchange for the financing services.

Simply put, Dealer Floorplan financing allows dealers to purchase units using a line of credit and they repay the debt as they sell their inventory.

A comparison can be made between the number of units sold and the number of vehicles financed to ensure that inventory levels are well balanced.

As with all inventory financing, collateral value is of top importance. This requires the bank to determine the collateral value at the time the loan is placed on the books, continuously inspect the collateral to determine its condition, and impose a curtailment requirement.

Curtailment is the lender prescribed process of removing vehicles from the floorplan and recovering their investment. If the dealer does not sell the vehicles within a lender-defined period of time, the dealer should expect the lender to impose curtailment advancements on those vehicle.

A dealer can expect a bank representative to complete flooring check sheets indicating that every unit has been verified, by serial number and description and that unsold units are indeed available for sale.