Floor Plan Financing Agreement Template for the United States

A Floor Plan Financing Agreement, often searched as a flooring financing or inventory financing agreement, is a commercial contract that lets dealers and retailers fund their inventory purchases through a revolving credit facility. You draw working capital to buy goods from manufacturers or suppliers, and the lender takes a security interest in that inventory as collateral. This structure suits businesses that carry substantial, high-value stock and cannot afford to pay the full purchase price of every unit up front.

What is flooring financing?

Flooring financing is the everyday name for floor plan financing. A lender (the floor plan provider) pays the manufacturer or distributor directly for inventory a dealer selects, and the dealer repays the advance when each unit sells. The dealer displays and sells the goods while the lender holds a security interest in them until they are paid off. Because the credit line revolves, the dealer can keep restocking as stock turns over, rather than arranging a new loan for every purchase.

When do you need this document?

You need a Floor Plan Financing Agreement when you run an inventory-intensive business and need working capital to hold adequate stock. Auto dealerships use flooring finance to buy vehicles from manufacturers and display them without paying the full price up front. RV dealers, boat and powersports dealers, and major appliance retailers rely on the same method. The agreement fits a business model built on buying inventory for resale, holding enough stock to meet customer demand, or bridging the gap between when you acquire goods and when customers pay. Equipment dealers, furniture retailers, and electronics stores commonly finance inventory this way.

Flooring financing beyond dealerships

The term "flooring financing" also comes up in a different context: consumer-facing financing programs offered by flooring companies and retailers for hardwood floor and other home flooring projects. A client shopping for hardwood might see "financing available" offers spread over 12, 24, or more months, often with a first year interest-free period. That retail model is distinct from the dealer inventory facility this template covers. Here, the agreement governs how a flooring business or any other dealer funds the wholesale stock it holds, not how a homeowner pays for an installed floor.

How does floor plan financing work?

The lender sets a credit limit and an advance rate, which is the percentage of a unit's wholesale value the lender will fund. When you buy a unit, the lender advances funds against it and records a security interest. You pay finance charges on the outstanding balance, usually accruing on each unit from the date it is floored. As units sell, curtailment schedules require you to pay down the balance, either in stages while a unit ages or in full once it is sold. The agreement sets reporting duties so the lender can verify inventory, and it defines what triggers default and what happens to the collateral afterward.

Key legal considerations

Several legal elements must be carefully structured in your agreement. The security interest must comply with UCC Article 9, including perfection through a UCC-1 financing statement. The advance rate sets what share of inventory value the lender funds. Finance charge calculations, payment terms, and default triggers need precise definition to avoid disputes. Reporting obligations typically mandate regular stock reports and sales data. Curtailment terms set how fast you must pay down the balance as inventory ages or sells. Cross-default provisions can accelerate the facility if you default on other obligations, and personal guarantees from owners may be sought. Insurance clauses protect both parties' stake in the financed inventory.

Legal requirements in the United States

Floor plan financing agreements in the US must fit federal and state commercial law. The Uniform Commercial Code governs the creation, perfection, and enforcement of security interests in inventory and proceeds. Truth in Lending Act disclosures apply where consumer credit is involved. The Equal Credit Opportunity Act bars discrimination in lending decisions based on protected characteristics. Lenders follow Bank Secrecy Act record-keeping and reporting rules. State UCC variations can affect perfection and enforcement, and some states add licensing rules for floor plan lenders. Federal Trade Commission rules address unfair or deceptive lending practices, and consumer protection laws may apply depending on the financed goods and the end customer.