Floor Plan Financing With An Interesting Result

Floor plan financing is a common method used by car dealerships to finance their inventory. Typically, a lender takes security over the inventory of the dealer and while the dealer remains in possession of the goods the lender allows for the sale of inventory in the ordinary course. The most common method of structuring floor plan financings requires that once a car is sold the proceeds from the sale are used to pay down the loan against the inventory provided, which is known in industry parlance as the 'cash-interest based management system'. In addition, there are often curtailments which require the dealer to pay down a certain percentage each month that a car remains in the dealer's inventory.