Floor plan financing is a revolving credit line that lets a dealer buy inventory, most often vehicles, and repay each unit’s advance when that unit sells. You pay interest and fees only on the units still on the lot, but the lender sets deadlines (curtailments), checks your lot in audits, and expects to be paid off promptly on every sale.
It is the core funding tool for car dealers, and it sits under our automotive business loans guide. This page explains how the costs work, what lenders check, and where dealers get into trouble, using the bank regulator’s own handbook and published lender terms.
How floor plan financing works
The Office of the Comptroller of the Currency (OCC), which supervises national banks, defines floor plan lending as “a form of inventory financing for a dealer of consumer or commercial goods, in which each loan advance is made against a specific piece of collateral” (OCC Comptroller’s Handbook: Floor Plan Lending). In practice:
- You get a credit line. The lender sets a total limit based on your credit, capital and sales history.
- Each unit is its own advance. When you buy a car at auction or from the manufacturer, the lender pays the seller and records an advance tied to that unit’s VIN.
- Interest runs per unit. Interest and fees accrue on each unit’s outstanding balance for as long as it sits in inventory.
- You pay it off when it sells. When a unit sells, you repay that advance and free up room on the line to buy the next one.
Floor plans are not only for cars. The OCC’s definition covers dealers of any consumer or commercial goods, so the same structure is used by other dealers that hold titled, serial-numbered stock. Our general guide to inventory financing covers non-dealer inventory.
What floor plan financing costs
Few floor plan lenders publish a rate card, so we have not listed a rate range. What the sources do say about how the costs are built:
Interest. The OCC says “floor plan loans usually are priced at a specific margin above a specified index rate.” So your rate typically floats with a benchmark, and your cost rises if that benchmark rises.
Advance rate. “A floor plan lender typically finances 100 percent of the dealer’s invoice cost for new merchandise,” according to the OCC, while used inventory is “usually extended with lower advance rates.” Some independent lenders advertise higher advances on auction buys; Westlake Flooring Services, for example, advertises 100% auction purchase financing, including transportation fees.
Fees. NextGear Capital, a large used-car floor plan lender, says floor plans “are typically composed of an interest rate, term periods, floor plan fees and curtailments/extensions” (NextGear: What is floorplanning?). Ask each lender for its full fee schedule: per-unit advance fees, audit fees, extension fees and late fees all add up.
Manufacturer help. On new vehicles, the OCC notes that manufacturers may offer “to pay the dealers’ interest costs during certain inventory marketing or promotional periods.” Ask your brand’s finance arm what floor plan assistance is available.
Curtailments: the payments that catch dealers out
A curtailment is a required principal paydown on a unit that has not sold by a set date. The OCC describes the curtailment provision as the “timing and percentage reduction in principal for each loan when the financed inventory does not sell within a specified period of time.” Its example: a new-car floor plan with a monthly curtailment of 10 percent of the original balance starting in the 10th month has a maximum maturity of 19 months.
Used-car plans usually run on shorter clocks. NextGear describes a term plan where a dealer makes “a minor payment” at 30, 60, 90 and 120 days. Westlake advertises “flexible terms up to 200 days.” Each lender sets its own schedule, so read it before you buy stock.
Curtailments are a cash-flow issue more than a cost issue. Every unit that ages past a curtailment date needs cash from the business, even though the car has not sold. A lot full of aging units can mean several curtailment payments falling due in the same week.
Floor plan audits
Because the lender’s collateral is parked on your lot, it checks that the units are still there.
- Frequency. The OCC tells banks that floor plan checks “should be completed … at least quarterly, but more frequently depending on the repayment terms,” and that they should include “both pre-announced and unannounced visits.”
- What they check. Inspections cover “identifying documents, verification of serial numbers, and comparison with any inventory lists.”
- Deadlines. NextGear’s audit page says dealer self-audits must be completed within 48 hours of notice. Unverified vehicles may incur additional fees if not verified by day 7, and a “maturity event” is declared on the unit if it is not verified before day 15.
Keep units that are out for repair, detail or a test drive documented, so you can verify them quickly.
Sold out of trust: the biggest risk
The OCC says a dealer “sells out of trust when the inventory is sold and the funds are not immediately remitted to the bank to retire the corresponding debt.” Using sale proceeds to cover payroll or buy more stock before paying off the sold unit is exactly this. Lenders treat it as a serious breach, and it can lead to the line being frozen or called. Pay off every sold unit on the terms in your agreement, even when cash is tight.
Floor plan financing options compared
| Provider type | Typical fit | What we could source | Watch for |
|---|---|---|---|
| Bank or captive finance company (e.g., Ally) | Franchised new-car dealers | Ally finances new-vehicle inventory, demos and auction purchases, and lets eligible dealers floor trade-ins and auction units (Ally) | Tied to the broader banking relationship; audits and reporting |
| Independent floor plan company (e.g., NextGear, Westlake) | Independent used-car dealers buying at auction | Westlake: licensed dealers in all 50 states, terms up to 200 days | Curtailment schedule and per-unit fees |
| Asset-based line of credit | Dealers who want one line for inventory and receivables | Terms set by each lender | Borrowing base reporting |
| SBA 7(a) or 7(a) Working Capital Pilot | Buying a dealership, real estate, or permanent working capital | 7(a) up to $5 million; the WCP line also goes up to $5 million, with a maximum maturity of 60 months | Slower to set up; not a per-unit floor plan |
The SBA figures come from the SBA’s 7(a) loan page. For how a borrowing base works on an asset-based line, see what is a borrowing base and our asset-based loans page.
What lenders look for
NextGear says that to qualify “you need to have credit. Specifically, you should have a history of utilizing and repaying debt,” and that “trade references, business credit, equity, cash and the overall health of your business” affect how much you can get (NextGear: Floor Planning 101). Expect lenders to also ask for:
- A valid dealer license (Westlake, for example, serves licensed auto dealers).
- Bank statements and financial statements.
- A personal guarantee from the owners.
- Proof of lot insurance covering the floored inventory.
- Your sales history and average days-to-sell.
After approval, your performance on the line drives future increases. NextGear warns that “NSF’s, late curtailments, slow payoffs and bad audits will inevitably prevent you from gaining the additional buying power you need.”
How much floor plan do you need?
NextGear gives a simple example: a dealer who sells 6 cars a week with an average cash in deal of $6,750 needs $40,500 a week just for inventory. Work out your own number the same way: weekly unit sales multiplied by average cost per unit, multiplied by the weeks a typical unit sits on your lot. That gives you a starting point for the credit line to ask for.
Pitfalls to avoid
- Letting units age. Every extra week adds interest and brings the next curtailment closer. Price aging stock to move.
- Selling out of trust. Pay off sold units on time, every time.
- Missing audits. Late verification can trigger fees and maturity events.
- Comparing rate only. Per-unit fees, audit fees and the curtailment schedule can matter more than a small rate difference.
- Putting a floor plan lien on top of other debt. Floor plan lenders take a security interest in your inventory. Our guide to UCC filings explains why a second lender may object.
Floor plan financing FAQs
What is a curtailment on a floor plan?
It is a required principal payment on a unit that has not sold by a set date. The OCC describes it as a set “timing and percentage reduction in principal” for inventory that doesn’t sell within a specified period.
Do I pay interest on the whole credit line?
No. Interest and fees accrue on the units you have floored and not yet paid off, not on the unused part of the line. Check your agreement for any minimum or unused-line fees.
What happens if a floor plan audit finds a missing car?
The lender will ask you to show where it is. If you sold it and did not pay off the advance, that is selling out of trust. With NextGear, units not verified before day 15 face a maturity event, meaning the unit’s balance becomes due.
Can a new dealer get floor plan financing?
Yes, but lines for new dealers are usually small at first. Lenders look for credit history, some cash and equity in the business, and a dealer license, and they raise limits as you show on-time payoffs and clean audits.
Next step
If you are setting up or expanding a floor plan, pull your sales history and average days-to-sell before you talk to lenders. Our automotive business loans hub covers the other financing dealers use, from real estate to working capital, and explains how SMB Compass helps you compare offers from the lenders we work with.
Sources
- OCC Comptroller’s Handbook: Floor Plan Lending
- NextGear Capital: What is floorplanning?
- NextGear Capital: Audits
- NextGear Capital: Floor Planning 101
- Westlake Flooring Services
- Ally: Wholesale inventory financing
- SBA: 7(a) loans
About this page. Written by Ezra Cabrera, Content Team Lead at SMB Compass. Figures were checked against the primary sources listed above on September 21, 2026; lenders change their terms, so confirm current terms before you apply, and let us know if you spot a figure that has changed. SMB Compass is a business financing broker: we don’t lend our own money, and we are paid by the lenders we place loans with. This page is general information, not financial, legal or tax advice.