Written byStocking finance is a short-term facility that funds a dealer's inventory unit by unit: the lender pays the supplier and the dealer repays each advance when that unit sells.
Also known as: floorplan finance, unit stocking finance, dealer floorplan, inventory funding
Key points
- Also called floorplan finance or unit stocking, it lets vehicle, truck and equipment dealers hold stock without tying up working capital.
- The lender advances most of each unit's purchase price, registers a security interest on the PPSR and audits the stock on hand.
- You pay a daily holding cost while a unit is unsold, plus facility, per-unit and audit fees, so slow-turning stock erodes margin.
- Selling a unit outside the agreed settlement process, letting insurance lapse or missing reports are common default triggers that can lead to repossession.
How stocking finance works
You order stock from a manufacturer or wholesaler. The lender pre-approves the purchase and pays the supplier, or reimburses you on delivery, then registers a security interest over each unit on the PPSR. The unit sits on your lot, but the lender keeps its rights until the advance is repaid. A retail customer buying in the ordinary course of your business takes the unit free of that registered interest, and the lender's claim shifts to the sale proceeds, which is why paying proceeds through the settlement process matters.
While the unit is held you pay a holding charge, either daily interest or a discounted fee up front. When it sells, the proceeds flow through the settlement process: the lender takes back its advance plus fees and you keep the margin. Repaying each unit tops up your limit, so the line revolves as stock turns. Lenders typically require insurance naming them as loss payee, condition and mileage standards for eligible units, and periodic audits reconciled against your dealer management system.
Types of stocking finance and what it costs
The most common form is a floorplan or unit stocking line: per-unit advances on a revolving limit. Consignment stock is different: the supplier keeps title until sale and you pay when the customer pays. Lines can be fixed (capped by value or unit count) or revolving, and manufacturer-backed captive programs offer promotional or deferred terms on new stock.
Pricing has several parts. The advance rate is the share of the invoice the lender funds, which varies with the unit's type, age and marketability. On top of the holding charge there may be a monthly facility fee, a per-unit setup fee, audit and reporting fees, and default, legal or termination fees. Holding cost multiplied by average days to sell comes straight off gross margin, so compare offers on the effective cost at 30, 60 and 90 days rather than the headline rate.
Eligibility, GST and risks
To qualify, lenders look at your time in business, experience with the unit types, recent financials and cash flow, turnover and margins for the stock category, and your stock control systems. GST on stock purchases is typically claimable where the purchase is in your name. When you claim depends on your GST accounting basis, cash or accruals, and on holding a valid tax invoice, not on who pays the supplier. Ask your accountant or BAS agent to record floorplan cash flows correctly.
The main risks are operational. Missed reporting, an uninsured loss or selling a unit outside the settlement process can trigger immediate repossession, and covenants such as aged-stock limits and minimum turnover can restrict draws. Check the PPSR regularly for competing security, confirm registrations after settlement, and keep discharge evidence. Stocking finance is commercial finance, so it sits outside the National Credit Code and its consumer protections. Check whether your lender is an AFCA member, and read the facility terms closely: the contract does most of the work.
Example
A used-car dealer buys a $40,000 vehicle from a wholesaler on its floorplan line. The lender pays the wholesaler most of the invoice, registers its interest on the PPSR, and charges a daily holding cost while the car sits on the lot. If the car sells in 30 days, the holding cost and per-unit fee take a small slice of the gross profit; if it takes 90 days, the holding cost triples and can eat a large share of the margin on the sale. When the buyer pays, the proceeds go through the lender's settlement process, the advance and fees are cleared, the dealer keeps the balance, and the freed-up limit funds the next car.
Not to be confused with
- Chattel mortgage
- a chattel mortgage finances one asset you keep over a fixed term, while stocking finance funds stock you intend to sell
- Overdraft
- an overdraft is a general working capital line that is not tied to individual units
Frequently asked questions
How does floorplan finance work?
The lender pays the supplier for each unit you stock and registers a security interest over it on the PPSR. You pay a holding charge while the unit is unsold. When it sells, the proceeds go through the lender's settlement process to repay the advance and fees, you keep the margin, and your limit is freed up again.
How is GST treated when the lender pays the supplier?
It depends on how the invoices flow. Often you can claim the GST input credit when the supplier invoice is in your name and your business is the entity liable to pay, even though the lender settles it. Because timing can differ, check the ATO's GST guidance and make sure your accountant records floorplan payments correctly on your BAS.
Can I sell stock outside the lender's process?
Only if the sale follows the facility terms, including the agreed settlement flow and payment to the lender. Selling a floorplanned unit and not paying the lender straight away is one of the most common default triggers, and it can lead to immediate repossession of stock and default fees under the agreement.
Does stocking finance affect my credit score?
The facility is usually recorded as a secured business facility, and the lender will normally run credit checks on the directors when you apply. If the business defaults and the directors are personally liable under the facility, the default can affect their personal credit files as well.
How do I end a floorplan facility?
Repay all outstanding advances, settle any termination fees set out in the agreement, and obtain PPSR discharge notices from the lender. Confirm the discharges have actually been lodged on the PPSR, and keep the evidence, so no stale security interest is left against your stock.
Related terms
Working capital
Working capital is the difference between a business's current assets and current liabilities: the measure of whether it has enough liquid resources to meet obligations due within 12 months.
Read definitionDealers
Dealers are businesses that buy and resell goods such as vehicles, equipment or machinery, and often arrange or introduce finance for the buyer at the point of sale.
Read definitionSupplier
A supplier is the party that sells the asset being financed, whether a vehicle dealer, equipment distributor, manufacturer or private seller, and is usually paid by the lender at settlement.
Read definitionSecurity (collateral)
Security (collateral) is an asset or legal interest a borrower grants a lender, which the lender can take and sell to recover the debt if the borrower defaults.
Read definitionChattel mortgage
A chattel mortgage is a business loan for a vehicle or equipment: you own the asset from settlement and the lender holds a security interest until it is repaid.
Read definitionOverdraft
An overdraft is a short-term credit facility attached to a transaction account that lets you spend past your available balance up to an agreed limit.
Read definitionGo deeper
Sources
This article is general information only and is not financial advice.