With more and more construction businesses looking for sustainable solutions to their fleet requirements, DLL’s inventory finance solutions can help to not only free up cashflow, but open new sustainable revenue streams for dealers and manufacturers alike.
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, powered by DLL. This line of credit arms the dealer with more purchasing power when buying from their manufacturer and provides an extended amount of time to pay for purchases that match dealer sales cycles. Manufacturers can also provide extended payment terms for their dealers by working with a floor plan financing provider like DLL.
How Does Inventory Finance Work?
The dealer places an order for inventory with their manufacturer and uses their DLL line to make this purchase. DLL pays the manufacturer for the requested inventory within a few business days. With a DLL line of credit, approved dealers are eligible to receive the equipment immediately after purchase.
In terms of repayment, DLL’s pay-as-sold (PAS) model sets the expectation that the dealer will repay DLL as soon as the product from the manufacturer is sold. The benefits of this PAS financial product are preservation of the dealer’s cash flow and reduced accounts receivable (AR) of the manufacturer.*
Inventory Finance and Sustainability
DLL’s inventory finance solutions support the movement of products and inventory through dealer channels in cash-efficient and sustainable ways.
Used equipment
Construction equipment dealers often have several sales channels including new machines, rentals, used machines, and parts. New machines have, historically, faced the same well-known challenge; supply chain issues that cause delivery bottlenecks.
As such, the demand for used machines is increasing, as is the willingness of dealers to accept trade-ins. There is also an appetite amongst dealers to take older machines and prepare or refurbish them for resale.
In addition to increasing revenue from refurbishment operations, DLL can accompany the dealer on this path with the offer of inventory finance for trade-ins and the purchase of used equipment, which can be managed via DLL’s Dealer Direct offering, which is a vendor agnostic line of credit supported and established with dealers directly.
Although DLL works with standard values and guidelines, it remains important to look at each asset individually. In this way, DLL can assist the dealer in increasing its inventory for used machines, allowing the flexibility to win new customers and keep machines in the economic cycle for longer.
Being able to include this equipment as an inventory finance solution and pay for it in full when it is sold, assists dealers in freeing up cashflow while still allowing them to trade in used construction equipment. This provides a huge boost to dealers’ sustainability efforts by helping to keep equipment in service longer and reducing the consumption of steel and iron, industrial waste, and factory carbon emissions.
Refurbished equipment
There has also been an increased appetite amongst equipment manufacturers to buy back financed assets for refurbishment. For example, if a dealer no longer wants to possess the equipment, the manufacturer may repurchase the asset from the dealer to refurbish and resell. This way, the manufacturer can utilize either the parts or the equipment in its entirety, resulting in less waste and a new sales channel.
Through its inventory finance solutions, DLL is creating value throughout the supply chain. Dealers who do not have the facilities to manage the refurbishment or servicing of trade-in assets themselves can make use of DLL’s inventory finance solutions to purchase these machines from manufacturers. Remanufactured machines tend to capture higher margins than new equipment, adding an additional source of revenue for manufacturers while their ability to finance remanufactured machines give dealers a sustainable product to sell.
Finance Sustainable Change with DLL
Whether you are a dealer looking for a tailored inventory finance solution or a manufacturer looking to partner with a finance partner, experts from DLL can provide insight and solutions. Contact the team to discuss your requirements.
*All lines of credit are subject to DLL credit approval. Terms and curtailments may vary by country and industry. Please speak to your local DLL rep to discuss how a DLL line of credit can help your business.
