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 plan lending risks.

An auto rv manufactured home etc. How does floor plan financing work specifically to benefit auto dealers. Provides an expanded examination procedures section and appendixes that include a glossary examples of risk rating cases and indicators for quantity of credit risk and quality of credit risk management. Describes the risks associated with floor plan lending sound risk management practices and regulatory risk rating guidelines.

For dealerships that follow the rules floor planning can prove to be an excellent business agreement between the lender manufacturer and dealer. 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. The loans are often made with a one year term and based on an aggregate budget. What does peoples offer as a floor plan lender.

This booklet addresses the risks associated with floor plan lending and discusses risk management practices for floor plan lending. 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. Dealer floor plan financing frequently asked questions for borrowers and lenders what is floor plan financing.

Peoples bancorp and. 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. And are subject to risks including the possible loss of principal. Floor planning is a form of financing for large ticket items displayed on showroom floors.

Floor plan lending services efficiently maximize your working capital. Floor plan lending is a form of inventory financing for a dealer of consumer or commercial goods in which each loan advance is made against a specific piece of collateral. 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.

These loans are made against a specific piece of collateral i e. Loans for new and used unit inventory real estate construction and term loans working capital term loans and lines of credit. For example a dealer might be able to borrow 10 million over the year to purchase 300. This booklet applies to the occ s supervision of national banks and federal savings associations.