Running a dealership in the automotive industry is both thrilling and challenging. But like with any other business model, the key to success is being able to navigate the industry efficiently while continuing to keep up with new trends in the market. One of the most critical aspects of running a successful dealership is financing and floor planning.
Floor planning refers to the process of financing inventory acquisition. Simply put, a floor planning company provides dealerships with the funds they need to purchase inventory and operate the business. In this blog post, we’ll explore the significance of floor planning companies in the automotive industry and how dealerships can use their services to their advantage.
Flexible Financing Options
Floor planning companies offer a variety of financing options to dealerships, suitable for different business models. Depending on the size of the dealership, floor plan companies provide flexible and customized financing solutions that boost the business's profitability.
Smaller dealerships may require financing for everyday expenses, such as supplies, overhead costs, and payroll. Larger dealership owners may need to finance extensive inventories of vehicles, so they require short-term loans. Dealership floor planning companies provide the right funding required for each dealer, regardless of their scale, so dealers can purchase the vehicles and supplies they require while keeping their business running.
Reduction of Risk
When a dealership uses a floor planning company's services, they reduce their inventory investment risks. Inventory ownership is a significant financial responsibility, and it requires ready cash. So, dealerships need to carry an inventory that adapts to current trends and market preferences.
Floor planning companies help dealerships in this regard by allowing dealerships to swap out inventory whenever the market changes. The dealer would replace slow-moving inventory items with faster-moving items without incurring additional costs, and Floor plan companies such as Nextgear Capital manage the swap-outs.
Better Cash Flow
Automotive dealerships can often find their finances in a bind due to inventory financing. Floor planning companies can help reduce the impact of inventory financing on the dealer's cash flow by providing easy, quick access to funding based on the retail value of vehicles and collateral. This fast and reliable access to financing ensures that dealers can purchase inventory even when unexpected costs arise so that their businesses remain afloat, and operations continue with minimal disruption.
Enhanced Relationship Management
Choosing to work with a floor planning company can also help dealership owners build better relationships with their lenders and car manufacturers. This way, dealerships get added benefits such as incentives, waivers, and special offers that would have been unavailable if the dealer chose not to work with a floor planning company.
Navigating through the automotive industry is no small feat. But understanding the importance of floor plan financing and the contribution of floor planning companies, one can gain a competitive edge over their competitors. Whether it’s flexible financing options or reduction of risks, working with floor plan companies can help dealerships streamline their operations, access working capital, and ultimately help their businesses achieve long-term success within the automotive industry.