This is, perhaps, the area requiring the most capital. Also, probably the most prevalent way of doing business in the auto industry is to “floor-plan” your inventory. What is floor-planning? This term refers to a line of credit that allows a borrower to finance vehicle inventory, using this inventory as collateral. As the inventory is sold, the “floor-plan” loan is repaid. Due to the harsh economic conditions of the past several years, the Federal government has worked to offer assistance to dealers in this specific area. Please read the article attached concerning Floor-planning and the Small Business Administration (SBA) titled, Dealer Floorplan Financing Program: https://www.sba.gov/content/sba-re-launches-dealer-floor-plan-pilot-loan-program

The basic premise of the program is to provide dealers another financing alternative. In order to qualify for the DFP Pilot Program, as it is called, a dealer must have net worth of less than $15 million and an average net income after income taxes of $5 million for the last 2 fiscal years. Further, net loss carry forwards cannot be used to calculate the average income. The minimum loan will be $500,000. The maximum loan will be $5,000,000. Dealers enjoy the benefits of low interest rates placed on these loans because these are guaranteed up to 75% by the government. In order to qualify for government guarantee, lenders must advance no more than invoice cost for new vehicles. Lenders can advance no more than the lower of (1) actual cost, or (2) wholesale book value for used vehicles.