What You Need to Know: The Basics of Floor Plan Financing in the Construction, Transportation and Industrial Sectors

Considering that cash flow needs have been a concern, especially over the past year, it is a perfect time to learn about the benefits of partnering with a floor plan financing provider.

What is inventory finance?

Also known as “floor planning” or “wholesale finance,” inventory finance is when a line of credit is established between a manufacturer or distributor and a dealer. This line of credit provides the dealer with an extended amount of time to pay for the purchase of inventory. Manufacturers or distributors in the construction, transportation, and industrial industries can also develop extended payment terms for their dealers by working with a floor plan financing provider. The industry typically follows a pay-as-sold or scheduled pay model, meaning the dealer can purchase inventory without upfront costs. Establishing a partnership with a floor plan financing provider will contribute to the financial stability of a dealer’s business while maintaining an ideal amount of inventory for long-term growth. This partnership will maximize sales opportunities and give a dealer’s business more control over expenses due to a longer payback period.

What products can be financed through a floor planning program?

Common equipment purchased by dealers are aerial work platforms, cranes, forklifts, excavators, skid steers, dump trucks, road building equipment, different types of vehicles, and much more.

How does floor planning work?

DLL’s main goal is to provide asset financing solutions for businesses, manufacturers, and suppliers. Through inventory finance, DLL will pay the manufacturer for your requested inventory within a few business days. With a DLL line of credit, approved dealers are eligible to receive the equipment immediately after purchase.

One method of repayment, the pay-as-sold model, sets expectations that the dealer will pay the finance vendor as soon as the product from the manufacturer is sold to the customer.

Dealers will pay DLL according to the manufacturer’s established terms and be expected to pay in full with interest-free terms on a predetermined date in the future. This process enables the dealer’s business to adapt to cash flow needs over an extended period of time and turn inventory faster, which can result in higher profits.

What are the benefits of floor planning for construction, transportation, and industrial manufacturers and distributors?

• Delivers revenue recognition. The manufacturer can record revenue quickly through floor planning.
• Drives increased dealer purchasing power. Pay-as-sold terms and extended payment options allow dealers to purchase more products at once from the manufacturer.
• Establishes a strong dealer base. Cash flow can be a concern for dealers, which may interest them in doing business with a manufacturer that offers a financing program. This provides an opportunity for the manufacturer to cultivate long-lasting partnerships with their dealers.
• Transfers credit risk and billing responsibilities. The finance vendor takes control of this job, which gives manufacturers more time to focus on other aspects of their business.
  
  

What are the benefits of floor planning for construction, transportation, and industrial dealers?

• Increases purchasing power. Dealers can purchase more equipment at once when they have higher credit lines. This keeps their lots fully stocked with inventory on-hand to be prepared for customer demand.
• Improves cash flow management. A dealer has a dedicated line of credit available which reduces their cash outflows.
• Offers flexible payment terms. Compared to a bank or manufacturer, vendor finance programs offer longer and more flexible payment terms.

What should construction, transportation, and industrial manufacturers or distributors look for in an inventory finance partner?

Exceptional customer service and ease of doing business are important factors in choosing a partner. Finding a finance vendor with extensive knowledge of the construction, transportation, and industrial industries will ensure that you can rely on their accuracy and precision. Flexibility for your business will be prioritized through customized solutions tailored to industry-specific needs, sales cycles, and long-term goals.

A vendor who offers an easy-to-use online portal provides all entities with a platform containing understandable reporting and transparency. It is very similar to a banking app available 24/7 to access all necessary information at the benefit of the manufacturer, distributor, or dealer. On this portal, you can access credit line information, recent transactions, and insight on what products are most frequently ordered and in stock.

Lastly, it is important to find a finance vendor that understands the individualized needs of the business and wishes to form a long-term partnership to benefit you in any business situation.

In 2020, over eighty-seven percent of customers in the construction, transportation, and industrial industries were satisfied or very satisfied with their overall experience with DLL as a financial partner¹. More than fifty years of experience in inventory finance has and continues to set us apart from our competitors. This company has successfully managed the finances of countless businesses around the world within this time span. We understand the importance of offering proven tailored solutions with exceptional customer service to all our valued business partners.

Source

1 2020 DLL NPS Survey