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Buy, Partner, or Build? Navigating the Complexity of Introducing Floor Plan Financing

As community banks strive to diversify their offerings and bolster their balance sheets, the introduction of commercial credit products like floor plan financing or wholesale financing should be considered as an attractive strategy. Known for its high-upside, although not without operational complexity, floor plan financing enables dealers of manufactured goods to purchase inventory in bulk and manage their cash flow effectively. The benefits for community banks are manifold – a robust and resilient portfolio, increased deposit growth, new customer acquisition, and deepened relationships with existing dealer customers.


However, the journey towards offering floor plan financing is not without its complexities. The decision boils down to three strategic options: buy, partner, or build. Let’s explore the pros and cons of each.


Buy: This strategy involves acquiring a firm that already offers floor plan financing.

Pros: You benefit from an existing customer base, an experienced team, established systems, and immediate entry into the market.


Cons: This strategy often involves a high upfront cost and may include hidden liabilities. There could also be potential cultural clashes between the acquired firm and the community bank.

Partner: This entails forming a strategic alliance with a firm specializing in floor plan financing.

Pros: A partnership provides immediate access to specialized expertise and allows for shared risks and costs. It also enables the bank to offer a new product with reduced upfront investments.


Cons: There might be a potential for misaligned objectives between partners. In addition, banks may have less control over the product offering and customer service.

Build: This approach requires developing the product in-house by hiring and training staff.

Pros: It provides maximum control over the product offering, enabling the bank to customize according to its needs and customer preferences.


Cons: It could take longer to market and require substantial investment in hiring, training, and infrastructure development. It might also strain existing resources.


Launching floor plan financing is not just a matter of offering a new credit product—it’s about providing a comprehensive service necessitating specialized operations. This includes title management, on-site audits, interfacing with suppliers, and managing a high volume of funding and collections due to the short duration of receivables.


Given these operational complexities, the need for a comprehensive end-to-end technology system is paramount. Every stage of the floor plan financing lifecycle—from origination to servicing, collections, and reporting—requires sophisticated technology tools to ensure operational smoothness, optimal efficiency, and superior customer satisfaction.


In conclusion, while the introduction of floor plan financing holds considerable promise for community banks, navigating the journey demands strategic clarity. Whether buying, partnering, or building, the decision must be guided by the bank’s long-term vision, resource availability, and risk tolerance.


As community banks forge ahead, a proverb comes to mind – ‘The best time to plant a tree was 20 years ago. The second best time is now.’ This rings particularly true for banks contemplating the introduction of floor plan financing. The path might seem daunting, but the seeds sown today, with strategic precision and foresight, can yield rich dividends in the future.

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