Floor Planning


DEFINITION of 'Floor Planning'

A form of financing pertaining specifically to inventory. A lender will purchase the inventory from the borrower and as the inventory sells, the borrower will repay the debt. It is essential that the creditworthiness of both parties is established and that a procedure for if the inventory does not sell is in place before the lending takes place.

BREAKING DOWN 'Floor Planning'

This type of financing began in the automobile industry as the purchase price for vehicles was high and standard financing was hard to obtain. Its popularity spread to home appliances and finally to large-scale home electronics such as personal computers.

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    The act of providing funds for business activities, making purchases ...
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  1. What are the generally accepted accounting principles for inventory reserves?

    As with most matters related to generally accepted accounting principles (GAAP), accountants assigned with the task of applying ... Read Full Answer >>
  2. What do people mean when they say debt is a relatively cheaper form of finance than ...

    In this case, the "cost" being referred to is the measurable cost of obtaining capital. With debt, this is the interest expense ... Read Full Answer >>
  3. Do dividends affect working capital?

    Regardless of whether cash dividends are paid or accrued, a company's working capital is reduced. When cash dividends are ... Read Full Answer >>
  4. Do prepayments provide working capital?

    Prepayments, or prepaid expenses, are typically included in the current assets on a company's balance sheet, as they represent ... Read Full Answer >>
  5. Does working capital include salaries?

    A company accrues unpaid salaries on its balance sheet as part of accounts payable, which is a current liability account, ... Read Full Answer >>
  6. What is a profit and loss (P&L) statement and why do companies publish them?

    A profit and loss (P&L) statement, or balance sheet, is essentially a snapshot of a company's financial activity for ... Read Full Answer >>

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