Floor Plan Financing Agreement for Canada

Floor Plan Financing Agreement Template for Canada

A comprehensive financing agreement governed by Canadian law that establishes a revolving credit facility secured by inventory. The agreement enables dealers to finance their floor inventory through a financial institution, with specific provisions for inventory management, security interests under the applicable Provincial Personal Property Security Act (PPSA) or Quebec Civil Code, advance mechanisms, and repayment terms. The document includes detailed provisions for inventory valuation, insurance requirements, reporting obligations, and enforcement rights, all structured to comply with Canadian federal and provincial regulations regarding secured transactions and financial services.

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What is a Floor Plan Financing Agreement?

The Floor Plan Financing Agreement serves as the primary documentation for inventory financing arrangements between financial institutions and dealers in Canada. This agreement is essential for businesses that maintain substantial inventory of vehicles, equipment, or other high-value goods, providing them with a revolving credit facility secured by their floor stock. The document comprehensively addresses security interests under Canadian law (including PPSA requirements), operational controls, financial covenants, and risk management provisions. It's particularly crucial for dealers who require continuous inventory financing but want to maintain operational flexibility, incorporating both federal and provincial regulatory requirements while establishing clear rights and obligations for all parties involved.

What sections should be included in a Floor Plan Financing Agreement?

1. Parties: Identifies the finance provider (lender) and the dealer (borrower), including their legal names, addresses, and any relevant corporate details

2. Background: Sets out the context of the agreement, including the dealer's business nature and the purpose of the floor plan financing arrangement

3. Definitions: Defines key terms used throughout the agreement, including but not limited to 'Inventory', 'Advance Rate', 'Eligible Inventory', 'Floor Plan Loan', and 'Security Interest'

4. Facility and Purpose: Details of the credit facility, including the maximum credit limit, purpose of the financing, and any sub-facilities

5. Advance Mechanics: Procedures for requesting and obtaining advances under the facility, including required documentation and conditions

6. Interest and Fees: Specifies interest rates, calculation methods, payment schedules, and all applicable fees

7. Security Interest: Details of the security interest being granted over the inventory and other collateral, including PPSA requirements

8. Representations and Warranties: Standard and specific representations and warranties from the dealer regarding business, inventory, and compliance

9. Covenants: Ongoing obligations of the dealer, including financial covenants, reporting requirements, and operational covenants

10. Inventory Management: Requirements for inventory control, storage, maintenance, and reporting

11. Insurance: Required insurance coverage for inventory and other insurable risks

12. Events of Default: Circumstances constituting default and consequences thereof

13. Enforcement Rights: Lender's rights and remedies upon default, including inventory liquidation rights

14. General Provisions: Standard boilerplate provisions including notices, amendments, governing law, etc.

What sections are optional to include in a Floor Plan Financing Agreement?

1. Multi-Location Provisions: Required when dealer operates multiple locations, specifying location-specific requirements and controls

2. Cross-Border Provisions: Needed for dealers who operate in multiple jurisdictions or import inventory from other countries

3. Floor Plan Audits: Detailed audit rights and procedures, typically included for larger facilities or higher-risk dealers

4. Manufacturer Agreements: Required when specific arrangements exist with manufacturers or suppliers regarding inventory financing

5. Intercreditor Provisions: Needed when there are multiple lenders or existing security interests

6. Environmental Compliance: Required for dealers handling potentially hazardous inventory or operating in environmentally sensitive locations

7. Guarantees: Required when personal or corporate guarantees are part of the security package

What schedules should be included in a Floor Plan Financing Agreement?

1. Schedule A - Eligible Inventory: Detailed description of inventory types eligible for financing and their respective advance rates

2. Schedule B - Borrowing Base Certificate: Form of certificate for calculating available credit based on eligible inventory

3. Schedule C - Advance Request Form: Standard form for requesting advances under the facility

4. Schedule D - Locations: List of approved locations where inventory may be stored

5. Schedule E - Financial Covenants: Detailed financial covenants and calculation methodologies

6. Schedule F - Insurance Requirements: Specific insurance requirements and minimum coverage amounts

7. Schedule G - Fees: Detailed breakdown of all fees, including calculation methods and payment schedules

8. Appendix 1 - Reporting Requirements: Forms and templates for required periodic reporting

9. Appendix 2 - Security Registration Details: PPSA and other security registration requirements and forms

Authors

Alex Denne

Head of Growth (Open Source Law) @ Genie AI | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

Jurisdiction

Canada

Publisher

Genie AI

Document Type

Finance Agreement

Cost

Free to use
Relevant legal definitions
Clauses
Relevant Industries

Automotive

Heavy Equipment

Recreational Vehicles

Marine

Agricultural Equipment

Construction Equipment

Manufacturing

Industrial Equipment

Technology Hardware

Home Appliances

Relevant Teams

Legal

Finance

Treasury

Risk Management

Compliance

Operations

Credit Administration

Asset-Based Lending

Commercial Banking

Dealer Operations

Security Administration

Inventory Control

Relevant Roles

Chief Financial Officer

Finance Director

Treasury Manager

Credit Manager

Commercial Lending Officer

Dealer Principal

Inventory Manager

Financial Controller

Risk Manager

Legal Counsel

Compliance Officer

Operations Manager

Floor Plan Administrator

Asset-Based Lending Manager

Security Registration Officer

Industries
Personal Property Security Act (PPSA): Provincial legislation (versions exist in each province except Quebec) governing creation, registration, and enforcement of security interests in personal property. Critical for floor plan financing as it covers inventory security interests.
Civil Code of Quebec: If the agreement involves Quebec, the Civil Code provisions regarding security on property (hypothecs) must be considered instead of PPSA.
Bank Act (Canada): Federal legislation governing banking and financial services, including provisions specific to inventory financing and security interests taken by banks.
Interest Act (Canada): Federal legislation governing interest rate disclosure requirements and calculations in financing agreements.
Bankruptcy and Insolvency Act (Canada): Federal legislation relevant for creditor rights and priority in case of dealer insolvency.
Provincial Consumer Protection Acts: Various provincial acts that may impact floor plan financing, particularly regarding dealer obligations and consumer rights in case of dealer insolvency.
Competition Act (Canada): Federal legislation relevant for pricing and competition aspects of dealer financing arrangements.
Provincial Sale of Goods Acts: Provincial legislation governing sales transactions, relevant for the underlying inventory transactions.
Criminal Code (Canada) - Section 347: Federal criminal law provisions regarding criminal interest rates (usury), which must be considered in setting interest rates and charges.
Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks,  Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination,  Severance Pay, Governing Law, Entire Agreemen

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