Car dealers I have questions about floorplans

[spotlessbureau]

Looking into starting up a small Indy location this fall. What floorplan company do you use? What type of criteria do they have? I am looking into mafs, dsc, afc and auto use. Open to others. Biz will be llc. Thanks

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[spotlessbureau]

hopeful, wishful bump

Edited July 8, 2012 by spotlessbureau

[WestCoastKid]

I'm a dealer in California of 4 years, here are my experiences with floor plans:

-MAFS is the toughest, look for various things in your biz bank statements, auction activity, etc. Good credit alone means nothing to them. Pulls EX

-DSC is not too hard, pretty much will approve on good EQ credit alone. Started me at $35k. However, they are very overbearing, especially when it comes to technology getting in the way. Their computers will always be scanning craigslist, eBay motors, autotrader, etc to see if any of your floored units (by VIN#) have listings that expire or are modified, removed, etc. on any of those sites and it will automatically freeze your account until all of your units have been verified. They'll usually slap an audit fee of about $60-90 on each car that happens to. Another $120 or so audit fee per month in general for an auditor to come to your lot at random.

-AFC also pulls EQ and cares mostly about personal credit like DSC. However they are SLOW as molasses. I applied with them over 6 weeks ago and was approved for $25k...as of today, the account is STILL not open and being processed! They are still asking me for additional copies of tax returns, etc that I've sent them several times already. The are nitpicking at the most mundane things and they tend not to like getting answers to their questions...

-Auto Use pulls TU, I had 670 fico when I applied and was told that was more than good enough credit. They said my credit and bank statements all passed with flying colors. Gave me the run around for several weeks. Bottom line, they didn't approve me because they didn't feel like it and made several BS reasons, depending on who I talked to.

 

Generally, the above companies, if they approve you, will only start you off with $25-50k(if you're lucky), unless you have very strong business financials over 3 consecutive years as well as high personal net worth.

 

Also, the fees to floor vehicles add up to be awfully high by the time its all said and done. Any other type of bank line of credit is way cheaper to borrow and way easier to access if it is as all possible to get one.

 

Feel free to PM me if you ever have any questions about anything dealership or car business related.

 

Cheers

[KYBOSH]

That was a great answer. Im not a dealer (nor wish to be) but im curious about this topic. OP asked about floorplans but your answer (audits and such) seems to be talking about a lot more. Are floorplans dealer talk for something more than what it sounds?

[spotlessbureau]

You are correct Plat rides answer was great! Floorplans are lines of credit dealers use to buy cars.

[KYBOSH]

Ahhh it all makes sense now.

[Kahrlos]

Can't add much to Platinum Rides comments except to agree that DSC is out of control. I inc'd a new biz in 2008 and applied with DSC shortly after. They gave me a $100k line. I always paid on time. In 2010 or 2011, I don't recall when, DSC scaled back operations and consolidated several offices across the country. About this time they asked all their dealers to sign a document that didn't sit well with me. It basically gave DSC access to my Bank via ACH. I had always paid electronically, but I was the one initiating a one way transaction. Now they wanted me to give them written permission to withdraw from my bank account at their discretion. I refused to sign it. They ended up closing my line. Good riddance. DSC is a pain in the....

[loanuniverse]

I might be able to give some perspective from the point of view of a Community Bank Lender.

 

Our floor plans are meant for established dealers, and hopefully it is the type of financing that you can "graduate to" down the road. Underwriting and managing floor plan facilities requires specialized personnel, and takes a significant amount of manpower to keep under control {think about the time that is needed to manage the titles, perform batch advances, and do periodic audits on the dealer}. Because of these characteristics, you will find it hard to find any lender that does small floor plan facilities. Anything under $500K will probably not be looked at under a floor plan structure.

 

What about pricing?

Other than small charges for audit fees or other small fees to offset the higher overhead, you can expect similar pricing to a business line of credit. Depending on the credit worthiness of the business and the risk appetite of the bank lender, you are looking at anywhere from 1% to 4% over prime.

 

Will I have to personally guarantee?

Yes. Unless your business has graduated to the level where the banks do not require a guarantee as a standard business practice. This point is a combination of revenues, profitability and capital structure. Anything under $10 Million in sales would be a hard sale unless the other metrics are stronger than normal.

 

How much will you advance?

For new automobiles, the industry standard is 100% of cost. For used automobiles, advances are also usually 100% based on the lesser of cost or average trade-in value as listed in NADA.

 

How quickly do I have to repay the advance?

Let me introduce you to "curtailment". Curtailment is a fancy word for principal repayment. For new cars, lenders set up the beginning of curtailment to coincide with the introduction of the next year’s models. For used cars, repayment is accelerated. Both are usually set at 10% a month.