Floorplan Finance

Find the best solution for your business when selling high-value items by comparing your floorplan finance options with Savvy.

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, updated on July 26th, 2023       

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What is floorplan financing and how does it work?

Floorplan finance in Australia is simply another name for inventory finance. This is different to how standard unsecured business loans work in that the process of satisfying all parties is different. When considering how floorplan financing works, the process is as follows:

  • Your business applies to a lender to gain access to funds and, if approved, the lender will forward these directly to your supplier.
  • Once your supplier receives the funds it needs to cover your business’ order, it can organise a shipment of goods to be delivered to you.
  • After your business receives its supplies, it can sell them and use part of the revenue generated from sales to repay the lender.

The line of credit is revolving, meaning it can stay open as long as it’s viable and prevents your business from needing to reapply for a short-term loan each time it purchases new stock from its supplier. Additionally, like unsecured business loans, this type of finance comes without any requirement for asset collateral, meaning it’s accessible for smaller or newer businesses who may not have the assets required to secure a loan.

The amount your business is able to borrow will be dependent on several factors, including the amount of revenue it generates each month or year and its consistency, its credit score and history, time in business, repayment periods and more. Because it’s a line of credit, you can access up to the maximum available amount whenever you need and pay it down at a pre-determined pace, as agreed upon by you and your lender.

What are the benefits of floorplan finance for my business?

There are a number of key benefits of floorplan finance in Australia. Some of these include:

Helping build a positive relationship with your supplier

With the help of financing provided by floorplan finance, your business can be aided in the building of positive relationships with suppliers which may not otherwise be possible without financial assistance. Consistently paying debts on time and in full will be recorded as positive credit behaviour by some suppliers, which can help boost your business’ credit score.

Maintaining your business’ cashflow

By having your business’ relevant expenses paid for upfront by your lender, you'll have more general revenue freed up to distribute across the rest of your business. If your business were to pay for these orders without financing assistance, you may find covering the cost of the importing and shipping of goods makes a significant dent in its available cash.

Short-term solutions to avoid dragging out debt

Sometimes, longer-term debts aren’t exactly what your business needs, especially if they result in a greater interest charge overall. By shortening this term to within your sales period, your business can stay on top of its debt and ensure that it’s off the books sooner rather than later. This can also improve its credit score over time.

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Why compare business loans through Savvy?

Why your business may need floorplan finance in Australia

Further questions regarding floorplan finance

Are there any other floorplan finance options available to my business?

Yes – you may find that the best option for your business is simply a standard unsecured business loan. These also come without security requirements and enable you to borrow between $5,000 and $500,000 over terms of three months to five years and generally charge a lower interest rate.

You can use the funds however you like across your business, not just for the purchase of stock. However, it may be more difficult to manage a lump sum, rather than drawing the funds when they’re needed. An unsecured business line of credit serves the same purpose, making it another viable option.

Is there any way to use the approved funds for other business purposes?

Not really – because you don’t actually see the funds yourself, given that your lender advances them directly to your supplier, there’s no real scope for your business to gain access to the funds for purposes beyond the purchase of stock.

What are the main floorplan financing requirements?

There are a number of important business loan requirements which your business is likely to be required to meet before getting approved, which primarily include:

  • At least six months of trading under your belt
  • A minimum monthly revenue of at least $5,000
  • A strong credit history without defaults or bankruptcy
How is interest charged on my floorplan finance deal?

Because floorplan finance is a line of credit, interest is charged only on the balance you’ve used, not the whole loan. For example, if your business was approved for a credit line worth $200,000 and spent $50,000 on a stock order, you would only be charged interest based on $50,000 rather than the full amount. The sooner you repay your debt, the less interest you’ll be charged overall.

Can my business purchase any type of inventory?

Yes – because you’re taking out an unsecured finance deal, you’ll be able to purchase just about any inventory you wish, within reason. However, you may find in some cases that your lender reviews the stock purchased, as they want to guarantee that your business will be able to sell it and thus keep your business in a position to comfortably service the debt in good time.

Will I need to provide a guarantee as part of the arrangement?

You may have to – some lenders will require you, the operator of the business, to provide a personal guarantee on the finance deal to ensure that, should your business’ ability to pay the loan fall through, it can still be repaid by you. This can alternatively come in the form of another company director. Essentially, a personal guarantee serves the same purpose a guarantor would on a home loan.

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