Floor Plan Financing
Floor plan financing is a method of financing inventory that usually involves a manufacturer selling its product to a dealer or distributor. For example, an appliance manufacturer may use a floor plan financing program so that its appliance dealers can buy inventory on credit. When the appliances are sold, the dealer uses the proceeds to repay the debt. The manufacturer retains a preferred lien on the inventory until the debt is repaid. If the dealer gets into financial trouble, this lien allows the manufacturer to promptly reclaim the inventory and sell it to another dealer. Floor plan financing can be offered directly by the manufacturer or through programs offered by third party finance companies.
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