Loan type
Floor plan financing for dealers and distributors
A revolving line that funds the inventory on your lot, unit by unit, repaid as each one sells — and explicitly outside what SBA loans may fund.
At a glance
| What it funds | Individual units of saleable inventory |
|---|---|
| Repaid | Per unit, when that unit sells |
| Secured on | The units themselves, by title or serial number |
| Curtailment | Scheduled paydowns on units that have not sold |
| Audits | Physical stock checks, at your cost |
| SBA? | No. Floor plan financing is an ineligible use of SBA proceeds |
A good fit when
You are a dealer holding titled, serial-numbered inventory — vehicles, powersports, RVs, boats, heavy equipment — that turns over.
A poor fit when
Your stock is not individually identifiable, or it turns slowly. Curtailment terms punish slow-moving units hard.
The SBA will not do this, and it is worth knowing why
The SBA's restrictions on use of proceeds, at 13 CFR § 120.130, list floor plan financing among the things loan proceeds may not be used for. It appears again in the rules for the Working Capital CAPLine and for MARC.
So if you are a dealer looking for inventory funding, the SBA programmes are not the route — though they remain available for everything else about the business: the property, the equipment, an acquisition, general working capital.
How it works
A line is set against your inventory
Sized on what you hold and what you turn, not on a fixed loan amount.
Each unit is funded individually
Advanced against that specific vehicle, machine or boat, identified by title or serial number.
You pay interest while it sits
The carrying cost of unsold stock is the whole economics of the product.
The unit sells, the advance is repaid
Usually within a short, contractually fixed window of the sale.
Curtailment on anything that lingers
Scheduled principal paydowns on units past a certain age, whether or not they have sold. This is where dealers get hurt.
What to compare
- The carrying cost per unit per month, not an abstract rate.
- The curtailment schedule — when paydowns start and how steep they are.
- Audit frequency and who pays for it.
- The reporting window after a sale, which is the clause that creates default risk.
- Whether the line is committed or demand, and what triggers a reduction.
- Manufacturer or captive programmes, which often price below independents on new stock but tie you to the brand.
Questions people actually ask
Can I use an SBA loan for floor plan financing?
No. Floor plan financing is listed among the restricted uses of SBA loan proceeds, and the restriction is repeated in the Working Capital CAPLine and MARC rules. SBA lending can still fund the rest of the business.
What is curtailment on a floor plan line?
A scheduled principal paydown on units that have not sold within a defined period. It is how the lender limits exposure to ageing stock, and it is the term most likely to cause trouble for a dealer whose inventory turns slowly.
What does sold out of trust mean?
Selling a financed unit and not remitting the proceeds to the lender within the agreed window. It is treated as a serious default rather than an administrative oversight, and it can end the facility immediately.