Floorplan funding (or as some in the business call it, “floor plan funding”) for inventory purchases can be an attractive option for independent auto dealers. But how do you know when your dealership is ready to start? Here are three signs a dealer can look for to determine whether the time is right for floorplan financing.
Cash flow is tight
As a business, it can be tough to pay for everything you need using cash alone. Cash gets tied up in things like on-lot inventory, dealership facilities improvements, and even payroll. When cash on hand is limited, it can become a problem fast.
Removing the burden of paying for inventory off your cash reserves can help improve cash flow. With floorplan funding, a dealer can turn existing inventory into collateral, rather than a cost source. You can then borrow against that inventory and pay them off as they sell, eliminating the need for cash at the time of purchase.
Diverting cash away from inventory purchases and into the many other expenses a dealership faces can help reduce the strain on the business’ cash flow.
>> Getting started with floorplanning? Here are some terms to know.
Not enough inventory on the lot
Growing your dealership typically involves growing your inventory options. After all, it’s impossible to sell vehicles you don’t have. That said, expanding your inventory isn’t always easy when you rely on purchasing vehicles out of pocket
That’s where a dealer floorplan can be helpful. A floorplan line of credit increases your available capital, which in turn increases the volume of inventory you can purchase. Cash on hand becomes less of an issue, and expanding your options for customers comes closer to being reality.
Whether the goal is to increase volume or add specific higher-value vehicles, floorplan funding can enable dealers to flex their strategy with the market.
Diverting cash from inventory purchases into the many other expenses a dealership faces can help reduce strain on cash flow.
Ready to expand the business footprint
As a business owner, you’re probably keeping an eye out for growth opportunities. But sometimes the timing doesn’t quite work out—you don’t have the cash on hand to invest in the next chapter of your business’ story.
Floorplan financing is a great way to provide the financial flexibility and free up capital to try that new thing like opening a second location, building an in-house reconditioning garage, or buying the empty lot next door—whatever will boost your business.
And with a floorplan line of credit through a trusted provider, seizing those moments of opportunity can be easier. Some floorplan companies have been in the business for years, and they understand the dealership business model and the unique struggles that dealers face. Working with an expert with a slightly different point of view can help uncover things you may not otherwise see.
It’s time to consider floorplanning
If cash flow and inventory acquisition are struggles for your dealership—or if you’re just looking to turbocharge your dealership’s growth in a sustainable way—it’s likely that floorplan funding could help. Think about taking the step from cash to credit, and get the tools you need to help you succeed at the highest levels.
Disclaimer: Dealers should consider all factors prior to agreeing to a floorplan and consult with their own advisers to make an independent business decision by reviewing the risks and advantages prior to signing any agreement. These descriptions of floor plan terms are general and actual terms and conditions of a floorplan are subject to the final written agreement between a dealer and its lender. AFC does not guarantee any business outcome based on the contents of this article.
