Floorplan financing hasn’t been as difficult to obtain as retail financing when using industry-approved financiers, dealers reported to Powersports Business in August, but relying on outside sources for additional funding has been challenging.
Outside lenders are often hesitant to offer loans if they’re used for floorplanning, making it difficult to borrow beyond what traditional powersports lenders approve. For example, Texas Motor Sports in Killeen, Texas, was recently approved for a $150,000 line of credit from one national banking chain, but the loan was rescinded when the lender learned the money would be used for floorplanning.
“At the local level, [floorplanning’s] a tremendous problem because I’ve approached four banks in the last couple months, and none of them want to do floorplan financing,” said Perk Bearden, president of Texas Motor Sports.
Jonny Johnston, owner of Cambridge Motorsports in Cambridge, Md., said he has had issues with the flexibility of floorplan lenders. Often he pays prime or prime-and-a-half rates on his floorplan loans, but ends up shelling out 6-8 points over prime after that inventory has been in his showroom for a year. He says that practice isn’t conducive for a seasonal business.
“If I have over 30 street bikes held over going on to October and November, all I can do is carry them over, and I’m paying interest,” he explained.
Johnston has also found that smaller banks aren’t willing to take on floorplan financing, leaving him with fewer options. Johnston believes if more lenders were open to floorplan financing, dealers would receive better rates.
“Competition changes the whole picture,” he said.
This story is a sidebar within the article: Wanted: Retail lending assist