What is inventory finance?
In the foodstuff and agriculture sector, inventory finance can be referred to as “floor planning” or “wholesale finance.” This directly benefits manufacturers, distributors, and dealers by giving distinct credit or short-term loans for inventory. The industry typically follows a pay-as-sold or scheduled pay model, meaning the dealer should buy inventory without upfront costs. Dealers have an extended period to repay the manufacturers and distributors over time. Manufacturers and distributors often decide to utilize a vendor finance company to supply dedicated credit lines to dealers for floor planning.
What products could be financed through a floor planning program?
Dealers should buy tractors, planters, combine heads, mowers, golf carts, UTVs, fertilizers, seeds, irrigation systems, parts, consumables, and much more.
So how exactly does floor planning work?
When a supplier or distributor partners with a financing company for floor planning, the dealer will purchase equipment directly from the maker employing a dedicated credit line from the finance vendor.
Rather than the dealer, the seller finance company can pay the maker or distributor in just a short period for the dealer’s purchases.
The dealer includes a specific time frame in a pay-as-sold model to sell these products based on terms between the maker and the finance vendor. Once the merchandise is sold, the dealer can pay the finance vendor based upon the contractual terms.
This is different from a scheduled pay model, where in actuality, the dealer purchases products from the maker, and the maker receive payment from the seller finance company. The dealer then has an extended period to repay the seller finance company with interest-free terms.
What are the advantages of floor planning for food and agriculture manufacturers and distributors?
Delivers Revenue Recognition
Floorplanning allows the maker or distributor to record revenue quickly.
Drives increased dealer purchasing power
Dealers may purchase more products simultaneously from the maker because of the pay-as-sold terms and extended payment options. This can increase revenue for the maker and distributor.
Helps with inbound cash flow
Manufacturers will receive payment rapidly from the finance vendor.
Establishes an excellent supplier base
Sellers and end-users are often concerned with their income movement, so they might be vulnerable to an organization with a provider that offers a financing program. This provides the maker with the capability to form long-lasting business relationships with their dealers.
Transfers credit risk and billing responsibilities
The finance vendor will assume these responsibilities to ensure that manufacturers have significantly more time concentrating on other areas of their business.
What are the advantages of floor planning for food and agriculture dealers?
Increases purchasing power
Through higher credit lines, dealers should buy more equipment simultaneously, thereby keeping their lots fully stocked with increased inventory on-hand to be prepared for customer demand.
Improves cash flow management
A dealer includes a dedicated line of credit available, which reduces their cash outflows.
Offers flexible payment terms
Via a vendor finance program, longer and more flexible payment terms can be found than what can be made available from a bank or manufacturer directly.
What should food and agriculture manufacturers or distributors look for within an inventory finance partner?
Ultimately, one of all essential factors in buying a partner is the ease of doing business and exceptional customer service. Food and agriculture manufacturers or distributors should consider purchasing a finance vendor that understands these businesses’ facts and offers flexibility and reliability to its customers. It is essential to partner with a merchant who offers personalized options tailored to a small business industry-specific needs, income rounds, and long-term goals.
Another helpful aspect is a vendor who offers an easy-to-use online portal that provides all entities with a platform containing understandable reporting and transparency. This is comparable to a banking app that can be acquired 24/7 to gain access to all necessary information at the maker, distributor, or dealer’s advantage. Functions with this portal can include:
- The usage of credit line information.
- Recent transactions.
- Even insight about what goods are most frequently ordered and in stock.
Lastly, consider buying a finance vendor that understands the business enterprise’s individualized needs and includes a want to interact to create a long-term relationship that’s good for any unique business situation.