Floorplan finance is no longer a white-knuckle ride

Donna Harris covers automotive retailing for Automotive News
There was a time in my life when I had three car accidents within six months. Back then, I would have a near panic attack whenever I heard screeching brakes. I'm now seeing some dealers just as jumpy about their inventory financing.

Many dealers lost their floorplan financing or faced much tougher finance terms during the credit crisis in 2008 and 2009. As a result, though the market for floorplan financing has improved this year, some dealers are still jittery after such traumatic circumstances.

Just this week a few Chrysler dealers were panicking over a rumor that Key Auto Finance was withdrawing from the inventory finance business. I called Greg Strong, Key's president, and he assured me the bank remains committed to the business and could even expand it.

That's not the only sign of life.

The Harris Bank, of Chicago, just launched a commercial loan division to serve dealers. Auto finance companies have been able to raise funds for dealer floorplan through the asset-backed securities market. And an attorney who works for many major auto lenders told me some lenders are returning to the floorplan business or accepting new accounts again.

Last, but not least, the federal government will launch an expanded guarantee program for floorplan loans through the U.S. Small Business Administration this spring.

To be sure, today's credit standards are stiffer for dealers, just as they are for consumers. But the floorplan finance business is looking up.