As a dealership, navigating the financial landscape can be challenging, especially when your business is growing and your needs are evolving. After all, a floorplan is only as good as its ability to grow with you—an inflexible line of credit can quickly feel too small for a dealership on the rise.
That’s why at AFC, we believe that a floorplan financing solution should grow with your unique financial needs. But what exactly is a line modification, and how do you know if it’s the right move for your dealership?
What is a Line Modification?
A line modification is an adjustment to your existing floorplan agreement with AFC. It can range from a simple tweak to a significant change, offering you more control over your financial flexibility. Whether you need a line increase to purchase more inventory, a term adjustment to manage cash flow, or in response to a change in ownership, line modifications ensure your financing aligns with your business needs.
What are the Different Types of Line Modifications?
There are several types of line modifications available to AFC dealers:
- Line Increase: Are you looking to grow your dealership and add more cars to your lot? A line increase gives you greater purchasing power to seize market opportunities and expand your business without financial strain.
- Term Changes: Adjusting your payment schedule or interest rates can provide the breathing room needed during seasonal fluctuations or slower periods, ensuring smoother cash flow management.
- Credit Limit Reduction: Sometimes, scaling down is necessary. A dealer may choose to reduce their credit line when they see a slow-down in the market, if they want to reduce the higher insurance premiums that come with a larger credit line, or if they want to reduce some of the administrative paperwork from carrying an increased credit limit. Whether you or your lender initiates a change, reducing your credit limit can be a strategic decision that helps you stay in-line with your financial goals and contract obligations.
How Do I Know If I Need a Line Modification?
Determining whether a line modification is the right choice depends on your dealership’s current situation. Here are a few scenarios where a line modification could provide significant benefits:
- Expanding Inventory
If your dealership is growing and you need more capital to purchase additional stock, a line increase ensures you have the resources to keep up with demand. - Capitalizing on Market Opportunities
Sometimes, an opportunity comes knocking, such as a chance to acquire a large batch of vehicles or enter a new market. A line increase allows you to move quickly, staying ahead of the competition. - Opening New Locations
Expanding your lot’s footprint to a new or additional location may mean you need twice as much inventory. In these cases, a line increase could prevent you from having to go into your cash reserves to fund the additional stock. - Evolving Business Model
Adjusting the terms of your financing, like changing your payment schedule, is just one of the ways that AFC’s floorplans are built to match your dealership’s changing needs—whatever those may be. - Consolidating Multiple Lines of Credit
It’s not uncommon for dealers to have multiple floorplans from different providers. Spreading costs between these may work in the short-run, but it may make more sense to simplify your payments by closing additional lines and going with a singular, expanded line of credit that gives you the same purchasing power. - Your Credit Line Has Been Reduced. AFC wants to be your trusted advisor and help you grow your business – and that includes helping you know when you’re growing too quickly. This means that sometimes, AFC needs to lower the credit line. If there are circumstances that may lead to a credit limit reduction like increased risk or payment issues, AFC will help identify potential issues to mitigate risk and explain the process for documenting the line modification.
Is a Line Modification Right for You?
Line modifications offer a smart way to adapt to growth, market opportunities, and even ownership changes. By working closely with your AFC branch team, you can explore how adjusting your credit line can help optimize your dealership’s financial strategy. If you’re ready to discuss your options or want to see how a line modification can empower your dealership, contact your AFC representative today.
* Disclaimer: Descriptions of AFC floorplans are for illustrative purposes only. Terms of AFC floorplan financing are subject to a final written agreement acceptable with AFC. AFC does not guarantee any results for floorplan financing and examples are for illustrative purposes only. Dealers should consult their own advisors to make independent business decisions regarding floorplan financing. Line Modifications are in AFC’s sole discretion and may require additional written documentation.
“AFC” refers to Automotive Finance Corporation, Automotive Finance Canada Inc., and AFC Cal, LLC in their respective jurisdictions. All California transactions are through AFC Cal, LLC. California loans will be made pursuant to Department of Business Oversight California Finance Lenders License. Canadian transactions are through Automotive Finance Canada Inc.
