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After The Internal Financing Strategy is Gone .. Now What? Floor Plan Finance To The Rescue!
OVERVIEW – Information on floor plan financing in Canada. Utilizing this Canadian Business financing strategy successfully grows.. sales!
When clients ask us for floor planning information several key points are always up for discussion. We will focus our article information on non-automotive floor plan financing.
Canadian wholesalers and retailers in non automotive markets often find it critical to keep sufficient inventory on hand for product sales, demonstrations, and order fulfillment. This type of focus on inventory is important to Canadian business owners and financial managers.
Your business has the need for inventory and floor plan financing that gives you’re the amount of credit limit you require to grow and prosper.
Interest rates charged on floor plan financing are important – equally as important is your ability to maintain enough gross margins to absorb floor planning charges and still generate a profit.
Floor plan financing in Canada is available for any wholesaler or retailer who is aligned with reputable manufacturers. Historically floor plan financing was for select industries but now it has broadened to a variety of consumer and commercial products. In the 1980’s and 1990’s floor planning of computers for OEM’s and Value added Resellers was an important component of the computer industry.
Floor plan financing is all about inventory. You need inventory as your products are sold to your customer based.
In many cases it also makes serious sense to ensure you have a financing program in place with the customer base also that is a logical extension of the floor plan financing that you yourself carry.
Floor plan financing is somewhat of a ‘ risk’ based financing, in that your floor plan lender always carries the risk that your firm might sell product ‘ out of trust ‘ – which is the finance terminology for the collateralization of your inventory by your floor plan financing firm .
A significant amount of emphasis in any floor planning arrangement is the focus that is put on your firms overall all credit worthiness and ability to conduct business in an honest and ethical manner. Clearly your business model also necessitates that your have strong inventory and control systems in place which allow you to report regularly on the inventory that is financed.
In Canada the Person Property Security Act and the concept of ‘security interest ‘is the lending documentation by which your inventory is financed and collateralized.
While physical inspections and regular and ad hoc audits are a key element of floor plan financing clearly the use of technology and the internet has significantly enhanced your ability to interact with your floor plan lender . At the root of all floors planning is the ability for the manufacturer, yourself, and the floor plan financier to communicate effectively. The overall all credit worthiness of your company drives the final decision on what amount of maximum floor planning credit line can be provided.
We often speak to our clients regarding floor planning facilities on the need for your business to understand your inventory turns – in a perfect world you want to have a strong inventory turnover which will drive a lower cost of carrying floor plan financing .In many cases the receivables you generate out of a sale of inventory can help to bolster your overall floor plan financing arrangement.
The ‘ worst case scenario ‘ in any floor planning arrangement is your firms inability to pay the floor plan financing at which point measure are taken to repossess product . No one wants that of course. That’s the most negative aspect of floor plan financing – the positive aspect is that it provides tremendous financing power for sales growth.
Floor plan financing is a key element of business finance for any wholesaler or retailer of manufactured products by well known household and industrial names. Speak to a credible, trusted and experienced financing in this area to determine how floor plan financing in Canada works and how it may improve your revenues and profits.
7 Park Avenue Financial :
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8
Office = 905 829 2653
Business financing for Canadian Firms , specializing in working capital, cash flow, asset based financing , Equipment Leasing , franchise finance and Cdn. Tax Credit Finance . Founded 2004 - Completed in excess of 100 Million $ of financing for Canadian corporations .
Stan has had a successful career with some of the world’s largest and most successful corporations.
Prior to founding 7 Park Avenue Financial in 2004 his employers over the last 25 years were, ASHLAND OIL, ( 1977-1980) DIGITAL EQUIPMENT CORPORATION, ( 1980-1990) ) CABLE & WIRELESS PLC,( 1991 -1993) ) AND HEWLETT PACKARD ( 1994-2004 ) He is an expert in Canadian Business Financing.
Stan has over 40 years of business and finance executive experience. He has been recognized as a credit/financial executive for three of the largest technology companies in the world; Hewlett-Packard, Digital Equipment and Cable & Wireless. Stan has had in depth, hands on experience in assessing and evaluating thousands of companies that are seeking financing and expansion. He has been instrumental in helping many companies progress through every phase of financing, mergers & acquisitions, sales and marketing and human resources. Stan has worked with startups and public corporations and has many times established the financial wherewithal of organizations before approving millions of dollars of financing facilities and instruments on behalf of his employers.
Stan Prokop
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