Floor Plan Inventory Financing When Buying a Boat Dealership
New boats are expensive to stock, and many dealers do not buy their showroom inventory outright. Instead, they finance it through a floor plan arrangement with a specialized lender, repaying each unit as it sells. When a dealership changes hands, the existing boat dealer floor plan becomes a central part of the closing: the seller’s balance must be dealt with, and the buyer needs its own arrangement in place for inventory going forward.
This article explains how an existing floor plan arrangement may affect the purchase of an existing, operating boat dealership. Floor plan lines are provided by specialized lenders under their own terms, separately from acquisition financing, and this article does not describe any particular lender’s program or provide rates or schedules. Agreements should be reviewed with qualified attorneys and accountants. Nothing here is legal or financial advice.
How a Floor Plan Arrangement Works
Under a typical arrangement, the floor plan lender pays the manufacturer when a boat is shipped to the dealer, and the dealer repays the lender for that unit when it is sold. The lender holds a security interest in the financed inventory and charges interest or fees while units remain unsold. Terms differ by lender and by manufacturer program.
Curtailments
Many floor plan agreements require curtailments, which are partial principal payments due on units that remain unsold after a set period. Curtailments can create cash demands when boats sit longer than planned, particularly in slower months. Buyers should review curtailment history to see how quickly inventory turns and whether aged units have created pressure. Our article on boat dealer seasonal cash flow explains how these payments interact with the selling season.
Inventory Audits
Floor plan lenders frequently audit inventory to confirm that financed units are on hand and that sold units were paid off. Audit results can reveal sold-out-of-trust issues, where a boat was sold without the lender being repaid. Buyers should request recent audit reports and ask how any exceptions were resolved.
Lender Consent and the Payoff at Closing
- The seller’s floor plan agreement may restrict a sale of the business or inventory without lender consent
- The seller’s balance is typically paid off at closing, often from the purchase price or through the buyer’s new arrangement
- The buyer’s floor plan lender may require manufacturer approval, financial information and its own audit before funding units
- Payoff letters and lien releases need to be coordinated with the acquisition lender and closing attorney
Because floor plan approval and manufacturer approval are often linked, buyers should start both early. See our article on boat dealer agreements.
Inventory Not on the Floor Plan
Used boats, trade-ins, parts and some accessories may be owned outright or financed differently. Their value and condition still need review. See our guide to used boat inventory at closing.
Working Capital Alongside the Floor Plan
Even with a floor plan in place, a dealership needs cash for curtailments, interest, payroll, parts and seasonal slowdowns. Buyers should plan working capital separately from the floor plan line. Our page on boat dealer working capital and lines of credit explains how we approach those needs.
How Acquisition Lenders View the Floor Plan
Acquisition lenders typically want to know that the buyer has a floor plan arrangement lined up, how curtailments will be handled and how inventory has performed. Our article on boat dealer loan requirements explains the documentation frequently requested.
US Professional Funding helps buyers finance the acquisition of existing, operating boat dealerships and can coordinate with the buyer’s floor plan lender on timing. Learn more about our boat dealer acquisition financing.
