Legal Definitions - floor planning

Definition: Floor planning is a type of financing where a loan is secured by merchandise and paid off as the goods are sold. This type of loan is usually given by a manufacturer to a retailer or dealer, such as a car dealer.

Example: A car dealership needs to purchase a large number of cars from a manufacturer to sell to customers. The manufacturer provides floor plan financing to the dealership, which allows them to borrow money to purchase the cars. As the dealership sells the cars, they pay back the loan to the manufacturer.

This example illustrates how floor planning works in the context of a car dealership and manufacturer. The loan is secured by the cars, and the dealership pays it back as they sell the cars to customers.