Get the funds you need to purchase expensive inventory for your business.
We’re reader-supported and may be paid when you visit links to partner sites. We don’t compare all products in the market, but we’re working on it!
If your business specialises in selling high-value items such as cars or electronics, finding the funds needed to purchase those items can place a big strain on cash flow. Floorplan finance is designed to provide the funds you need to buy inventory for your business, helping you put products on the shelves without making a significant dent in your day-to-day cash flow.
How does floorplan finance work?
Floorplan finance, which is sometimes also known as inventory finance, is designed to help retailers purchase high-value items for resale to customers. This type of financing provides a revolving line of credit, providing access to the funds you need to purchase inventory for your business and stock the shelves.
The way it works is quite simple: the lender pays the manufacturer or distributor for the stock you purchase. Then when an item is sold, you repay the appropriate amount of floorplan finance to the lender. This ensures that you don't have too much working capital tied up in your business inventory, leaving other funds free to provide the cash flow your business needs from one day to the next.
What can you use floorplan finance for?
Floorplan finance allows you to continue to help your business grow without tying up all your funds to purchase inventory. It allows you to purchase the items you need to stock the shelves and get customers through the door, but at the same time ensures that you have enough cash flow to manage and expand your business.
It's also an extremely useful form of financing for seasonal business or those that experience fluctuating cash flow. For example, in the lead-up to Christmas, retailers need to purchase extra stock to cope with the anticipated increase in sales. Many smaller retailers simply don't have enough cash available to purchase the necessary stock, so inventory finance provides the funds they need to maximise sales during this busy shopping period.
Manage cash flow
If you're waiting on payment from invoices that could help you free up funds to purchase additional stock, invoice financing could be an option to consider. It's a type of business loan that is secured by the unpaid invoices and comes with reduced risk, no asset requirements or interest payments.
Compare invoice financing products below.
How to compare floorplan finance loans
There are several important factors you'll need to consider when comparing floorplan finance loans for your business, including:
- Interest rates. The interest rate that applies to your line of credit will impact the total cost of repaying the money you borrow, so compare interest rates across lenders to find the best value for money.
- Fees. Floorplan finance fees can also affect the total cost of financing. Remember to check for upfront charges such as application or establishment fees, as well as any ongoing fees that apply to the business loan facility.
- Secured or unsecured. Most forms of inventory finance are secured directly to the inventory items you purchase and then re-sell. However, unsecured financing is also available in some cases. Make sure you compare both options to decide whether a secured or unsecured loan is right for you.
- Loan amount. Check with each lender to find out the maximum amount you'll be allowed to borrow.
- Repayment flexibility. Check how long you have to repay the funds you borrow after items of inventory are sold. When you sell stock purchased with floorplan financing, you either repay the debt or purchase more stock. The lender will also conduct periodic stock checks. If you have insufficient stock to secure the funds you have borrowed you'll have to repay some of the finance.
- Type of inventory. Inventory finance can be used to purchase a wide range of high-value items, from cars and motorcycles to electronics and even agricultural equipment. Check which types of inventory your lender will allow you to finance.
Is there anything to avoid?
There are a few key risks you should be aware of before applying for inventory financing. Consumer appetites can be quite fickle, so items that are in high demand now may quickly go out of fashion. Business sales could take an unexpected downturn, while there's also a risk that items could be stolen or damaged. When any of the above happens, you could be left with a loan that you may struggle to repay.
Speaking more generally, it's always important to be careful not to get in over your head. Never borrow more than you can comfortably afford to repay, and remember to check the fine print to familiarise yourself with all the fees and charges that will apply to your loan facility.
Alternatives to floorplan finance
More guides on Finder
UCapital Unsecured Business Loan
A UCapital unsecured business loan can provide up to $300,000 without security, with repayment terms between 3 and 12 months.
How to start a mobile app business
Learn the key considerations when it comes to starting and growing your smartphone app company.
How to start a vintage clothing store business
Here's how you could turn your love for vintage clothes into a money-making enterprise.
How to start an accounting business
Find out what you need to know before starting an accounting business.
How to start a home cooking business
Follow this ultimate recipe for how to start your cooking business.
2018 Toyota HiLux Review
Looking to purchase a 4x4 ute? It might be worth adding the 2018 Toyota HiLux to your shortlist.
How to start a beauty business
From qualifications to getting the right insurance in place, here’s our guide to starting your beautician business.
6 of the biggest property mistakes people have made in 2020
Property expert Lloyd Edge shares his insights on the property pitfalls buyers and owners have struggled with in this (unprecedented) year.
Best motorcycle helmets in Australia
These are the seven best Motorcycle Helmets you can purchase in Australia right now.
Ask an Expert