Floor Plan Financing Agreement Form

What is the Floor Plan Financing Agreement

The floor plan financing agreement is a specialized financial arrangement that allows dealerships to finance their inventory, particularly vehicles. This type of financing enables dealers to purchase vehicles and display them on their lots without the immediate burden of full payment. Instead, dealerships pay interest on the financed amount until the vehicles are sold. This agreement is crucial for maintaining a diverse inventory while managing cash flow effectively.

Key elements of the Floor Plan Financing Agreement

A comprehensive floor plan financing agreement typically includes several essential components:

• Inventory Description: A detailed list of the vehicles covered under the financing agreement.
• Loan Amount: The total amount financed, which reflects the cost of the inventory.
• Interest Rate: The rate charged on the borrowed amount, impacting the overall cost of financing.
• Repayment Terms: Specifics on how and when payments are to be made, including any grace periods.
• Default Clauses: Conditions under which the lender can declare a default and the consequences thereof.

Steps to complete the Floor Plan Financing Agreement

Completing a floor plan financing agreement involves several key steps:

1. Gather Necessary Documentation: Collect all required financial documents, including business licenses and financial statements.
2. Review Terms: Carefully read through the terms of the agreement to ensure understanding and compliance.
3. Complete the Application: Fill out the financing application with accurate information regarding the dealership and inventory.
4. Submit for Approval: Send the completed application to the lender for review and approval.
5. Sign the Agreement: Once approved, sign the agreement electronically or in person, depending on the lender's process.

How to obtain the Floor Plan Financing Agreement

Obtaining a floor plan financing agreement typically involves reaching out to financial institutions or lenders that specialize in dealer financing. Many banks and credit unions offer tailored products for car dealerships. Dealers can initiate the process by:

• Researching Lenders: Identify lenders that provide floor plan financing and compare their terms.
• Contacting Lenders: Reach out to potential lenders to inquire about their application process and requirements.
• Submitting an Application: Complete and submit the application as per the lender's guidelines.

Legal use of the Floor Plan Financing Agreement

The legal use of a floor plan financing agreement requires adherence to specific regulations and compliance with state and federal laws. It is essential for dealerships to ensure that:

• All Parties Understand the Terms: Both the dealer and the lender must fully understand the agreement's terms and conditions.
• Compliance with State Laws: Each state may have specific laws governing financing agreements that must be followed.
• Proper Documentation: All necessary documentation is completed and retained for legal purposes.

Examples of using the Floor Plan Financing Agreement

Floor plan financing agreements are commonly utilized in various scenarios within the automotive industry. For instance:

• New Car Dealerships: Often use these agreements to finance a wide range of new vehicles, allowing them to maintain an attractive inventory.
• Used Car Dealerships: These dealers may also rely on floor plan financing to acquire used vehicles, helping them manage cash flow while offering diverse options to customers.
• Special Promotions: Dealerships may use floor plan financing to stock up on inventory during promotional events, ensuring they have enough vehicles to meet customer demand.