Floor plan financing is a useful tool for many businesses that specialize in selling expensive equipment. From vehicles to home appliances, making sure that the sales floor is stocked with quality products is no easy feat. Rather than using traditional fixed loans that provide little flexibility, floor plan financing leverages purchased inventory to act as its own collateral. Provided the business makes sales quickly and effectively, this kind of financing allows them much more control over subsequent inventory purchases.
But what are some of the businesses that use floor plan financing and how do they benefit? Here are some of the main categories.
One of the largest groups that use floor plan financing is automotive dealerships. Whether they are selling used or new cars, a lot of these lots are filled with vehicles backed by floor plan financing. This kind of financing option is lucrative for car dealerships because it gives them a revolving line of credit to replenish inventory the way they want. This could be in the form of direct purchases from manufacturers or through used car sales and auctions through private sellers.
While all businesses that use floor plan financing must be wary of curtailment (that is, penalties for not selling their inventory fast enough), this structure incentivizes car dealerships to become effective salespeople. In turn, the more sales a dealership makes, the faster it can maximize its profit and reinvest that money into future growth, new inventory, or paying down old debt. Either way, savvy car dealerships can offer the best service and vehicles to their customers and are encouraged to keep finding ways to improve their processes by using floor plan financing.
Dealerships that specialize in recreational vehicles — whether campers or even ATVs, travel trailers, and others — enjoy the same benefits as car dealerships that use floor plan financing. Regardless of the vehicle being sold, floor plan financing will help keep your sales floor filled with plenty of options to impress potential customers. In that same vein, a wider selection of vehicles gives your sales team more opportunities to find the right vehicle a curious customer is looking for.
Even boat dealerships can leverage floor plan financing to their advantage. As the marine industry has been growing over the past few years, the popularity of floor plan financing in this sector has followed suit. Whether your business buys and refurbishes used watercraft or retails new top-of-the-line models directly from the manufacturer, floor plan financing lets boat dealerships buy inventory to keep their business afloat. This is especially true if you are competing with larger, well-established dealerships in the area that already have large inventories to attract customers.
Heavy Industrial and Construction Equipment Dealerships
Dealerships that specialize in construction and industrial equipment also use floor plan financing. While their customers might be in a unique niche, that does not change the need for financial flexibility for those that sell heavy vehicles. Floor plan financing lets these kinds of dealers stock the best equipment they can offer, in turn providing better equipment to those they serve.
Home Appliance Retailers
Businesses outside of vehicle dealerships can also make use of floor plan financing. Retailers that sell home appliances like ovens, refrigerators, washers, and dryers can finance and replenish their inventory much more effectively this way than with a traditional fixed business loan. Where other retailers might make use of merchant cash advances that help pay down financing costs with each transaction, floor plan financing is a better option due to much lower sales volume and higher inventory costs compared to, for instance, a clothing store.
While these kinds of businesses might not need as much capital as vehicle dealerships, the structure remains beneficial to incentivizing fast sales and keeping one’s sales floor replenished.
Finally, large furniture stores and retail warehouses can use floor plan financing for all the above reasons. Whether you have a small retail store specialized in living room decor or sprawling superstores with furniture for every room, floor plan financing gives you the flexibility and control you need to choose the right inventory for your business.
If your business fits into any of these categories and you are looking for financing options, come talk to our helpful staff here at Floor Plan Xpress today. We would love to help you find the floor plan financing that is right for you and come up with strategies to make the best use of these tools.