Floor Plan Lending Risks

This booklet addresses the risks associated with floor plan lending and discusses risk management practices for floor plan lending.

Floor plan lending risks.

Floor plan lenders include local and regional banks large national banks and financing companies owned by the manufacturing companies like toyota financial or ford credit. Floor planning is a form of financing for large ticket items displayed on showroom floors. For example a dealer might be able to borrow 10 million over the year to purchase 300. 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.

What does peoples offer as a floor plan lender. For example automobile dealerships utilize floor plan financing to run their businesses. The loans are often made with a one year term and based on an aggregate budget. 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.

Dealer floor plan financing frequently asked questions for borrowers and lenders what is floor plan financing. An auto rv manufactured home etc. Floor plan financing is a revolving line of credit that allows the borrower to obtain financing for retail goods. 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.

This booklet applies to the occ s supervision of national banks and federal savings associations. 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. Floor plan lending services efficiently maximize your working capital. How does floor plan financing work specifically to benefit auto dealers.

Describes the risks associated with floor plan lending sound risk management practices and regulatory risk rating guidelines. Floor plan finance companies are uniquely attuned to the needs of auto dealers. And are subject to risks including the possible loss of principal. 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.

Peoples bancorp and. Impact of floor plan lending activities on a bank s risk profile and financial condition. 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. These loans are made against a specific piece of collateral i e.