Floor Plan Financing Agreement Template for New Zealand

A Floor Plan Financing Agreement is a specialized commercial lending document that enables dealers to obtain revolving credit facilities to finance their inventory. This type of financing is essential for businesses that require ongoing funding to purchase and maintain stock, allowing them to operate with improved cash flow while the lender maintains a security interest in the financed goods.

When do you need this document?

You need a Floor Plan Financing Agreement when operating a dealership or retail business that requires significant upfront investment in inventory. This includes vehicle dealerships purchasing cars, trucks, or motorcycles from manufacturers, equipment dealers stocking machinery or tools, furniture retailers maintaining showroom displays, and appliance stores carrying major household items. The agreement is particularly valuable when you need flexible access to credit that adjusts based on your inventory levels, allowing you to increase stock during peak seasons and reduce it during slower periods. It's also essential when traditional term loans don't provide the operational flexibility required for inventory management.

Key legal considerations

Several critical legal elements must be carefully addressed in your Floor Plan Financing Agreement. The security arrangements must clearly establish the lender's rights over the financed inventory, including provisions for inspection, insurance requirements, and restrictions on disposal without consent. Reporting obligations typically require regular submission of inventory reports, sales data, and financial statements to maintain the facility. Default provisions should specify events that trigger acceleration of the debt, such as breach of financial covenants, failure to maintain insurance, or unauthorized disposal of secured goods. The agreement must also address the dealer's operational requirements, including provisions for ordinary course sales, new inventory purchases, and the treatment of proceeds from sales.

Legal requirements in New Zealand

Under New Zealand law, Floor Plan Financing Agreements must comply with the Personal Property Securities Act 1999 (PPSA), which governs the creation and registration of security interests in personal property. The lender must register their security interest on the Personal Property Securities Register to protect their priority rights against other creditors and purchasers. The agreement must also comply with the Contract and Commercial Law Act 2017 regarding contract formation and enforceability. While the Credit Contracts and Consumer Finance Act 2003 primarily applies to consumer credit, certain disclosure requirements may apply to commercial arrangements. The Fair Trading Act 1986 prohibits misleading or deceptive conduct, requiring accurate representations about financing terms and conditions. Additionally, the Privacy Act 2020 governs the collection and use of business and personal information, particularly relevant when personal guarantees are involved or when dealing with sole traders and small companies.