Financial Options for Independent Car Dealers


When it comes to floorplans, independent dealers have two distinct choices: finance companies and banks. I often argue that one of the most critical factors in a dealership’s long-term success is its relationship with its floorplan provider. Too many dealers don’t take the time to investigate their floorplan choices and how they fit their business in the long term. Oftentimes, your floorplan program can be one of the largest expenses on your P&L and your floorplanner relationship will have a big impact on growing your business.

There are many things you need from your floorplanner but the most important is confidence that your floorplan provider is there for you in both tough times and good times. Reminiscent of the credit crunch in 2008 and 2009, the beginning of the pandemic was a good litmus test that may have challenged the commitment from your floorplanner. When you need them most, you don’t want them to run for the hills.

You and I know that what goes on behind the scenes in a dealership — how each dealership is operated, financed, and managed — changes from dealer to dealer. The same is true for floorplan finance companies and banks that provide floorplanning for independent car dealers. Each has its own focus, goals, and client profiles and the differences happen to really matter to the bottom line of dealerships.

To that end, I’ve included below a few differences between floorplan finance companies and banks along with some ways to evaluate each to help determine which is the best fit for your business.

Typical Attributes of Floorplan Finance Companies

  • Easier to get approved for a floorplan line of credit.
  • Startups and younger dealerships may be more likely to get credit approved.
  • Heavily focused on inventory/collateral.
  • Borrow the money they loan (floorplan) to dealerships — a cost that banks don’t incur.
  • Serve all types of dealers (startups, wholesalers, salvage, conventional retail, boat/RV, etc.).
  • Typically serve thousands of floorplan clients (small and large), resulting in “low touch” customer service.

Typical Attributes of Banks

  • More thorough underwriting process to get credit approved.
  • Serves seasoned, mature dealerships with a history of performance.
  • Focused on dealerships’ overall financial picture, not just inventory.
  • Floorplan funds sourced from bank deposits at a much lower cost of funds, passing savings to dealer.
  • Much smaller portfolio of floorplanning clients resulting in more personalized service.
  • Offers other banking services, such as private wealth, employee 401(k), checking, based on your floorplan relationship.

Regardless of which type of floorplan financing provider fits your dealership, you should look for and demand these qualities in your relationship with any lending partner:

  • Make sure there are professionals on their team who know the independent car dealer business. Look for car people among the bankers who can help you navigate the financial side of the business to thrive.
  • If you choose a bank, make sure that the bank is committed to the floorplan business and has dedicated professionals who specialize in floorplanning instead of “general bankers” who bank all business types.
  • Look for floorplan providers that are connected to all your auctions so you can pay directly for your purchases. If the age of COVID-19 taught us anything, it’s that the more we’re connected online, the easier our business is.

First Business Bank’s Floorplan Financing group serves larger, well-established independent car dealers with high-touch client service at industry-competitive costs. As car people first — bankers second — our floorplan experts strive to be your dealership’s strategic advantage, bringing formidable expertise in the auto industry with sales, operations, and floorplanning.