CHAPTER 13 Financing the business 545The most important example of inventory finance is floor-plan finance, which is very commonly
found in the motor vehicle (cars, trucks and motorbikes) retail sector. Examples in Australia include GE
Capital, NAB Asset Finance and Macquarie Leasing.
The lending arrangements with floor-plan finance involve three parties: the lender, the manufac-
turer and the borrower (the retail dealer). After the initial contracts outlining each party’s responsi-
bilities are in place, the dealer places an order with the manufacturer, who then contacts the lender to
see if the dealer’s credit for that amount is good. If so, the order is filled, the dealer gets the inven-
tory and the lender receives the invoice to pay. Until the inventory is sold, the dealer pays interest on
a monthly basis to the lender, and has an obligation to repay the principal as soon as the inventory is
sold.
Floor-plan finance is commonly found in the motor vehicle retail sector.
VALUE TO BUSINESS• The most common sources of short-term finance for entities are:- accrued wages and taxes
- trade credit
- bank overdrafts
- commercial bills and promissory notes
- factoring or debtor/invoice/trade finance
- inventory loans or floor-plan finance.
• Accrued wages and taxes, as well as trade credit, are the most important source of short-term
finance for entities. This is because the funding arises during the normal course of business, is free
of charge and is extended without formal agreements.