Floor Financing Definition

These loans are made against a specific piece of collateral i e.

Floor financing definition.

The arrangement is most commonly used when large assets such as automobiles or household appliances are involved. Floor plan finance companies are uniquely attuned to the needs of auto dealers. Floor planning is a method of financing inventory purchases where a lender pays for assets that have been ordered by a distributor or retailer and is paid back from the proceeds from the sale of these items. Also the price at which a stop order is activated when the price drops low enough to activate such an order.

An auto rv manufactured home etc. An interest rate cap is a derivative in which the buyer receives payments at the end of each period in which the interest rate exceeds the agreed strike price an example of a cap would be an agreement to receive a payment for each month the libor rate exceeds 2 5. 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 plan financing is a revolving line of credit that allows the borrower to obtain financing for retail goods.

What you don t realize is that like most new car dealers a floor plan was used to finance the cars. When each piece of collateral is sold by the dealer the loan advance against. The dealer then receives payment hopefully including a profit and remits the balance to. For example a dealer might be able to borrow 10 million over the year to purchase 300.

An interest rate floor is an agreed upon rate in the lower range of rates associated with a floating rate loan product. Simply it is a way for an auto dealer to use a lender s funds to finance the cars and until each of them is sold the lender holds title to the cars. The loans are often made with a one year term and based on an aggregate budget. Interest rate floors are utilized in derivative.

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. They are most frequently taken out for periods of between 2 and 5 years although this can vary considerably. In context of otc interest rate options a series of interest rate put. A floor in finance may refer to several things including the lowest acceptable limit the lowest guaranteed limit or the physical space where trading occurs.

Retailers use a short term loan to purchase inventory items and the loan is repaid as inventory is sold. Floor planning is a type of inventory financing for large ticket retail items. Floor the area of a stock exchange where active trading occurs.