(Section 210) Table of Contents
教师节 英文Introduction1 Examination Procedures5
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Comptroller’s Handbook Floor Plan Loans (Section 210)
(Section 210)Introduction Floor plan, or wholesale, lending is a form of retail goods inventory financing
in which each loan advance is made against a specific piece of collateral. As
each piece of collateral is sold by the dealer, the loan advance against that
piece of collateral is repaid. Items commonly subject to floor plan debt are
automobiles, large home appliances, furniture, television and stereo equipment, boats, mobile homes, and other types of merchandi usually sold under a sales finance contract.
This type of financing involves all the basic risks inherent in any form of
inventory financing. However, becau of the banker’s inability to exerci full control over the floored items, the exposure to loss is generally greater than in other similar types of financing. Most dealers have minimal capital bas
疯狂英语在线阅读relative to debt. As a result, clo and frequent review of the dealer’s financial information is necessary. In analyzing that data, it is important to review the
number of units sold and the profitability of tho sales. A comparison should be made between the number of units sold and the number financed to ensure that inventory levels are not excessive. As with all inventory financing,buoyancy
collateral value is of prime importance. Control over that requires the bank to
服装设计招聘determine the collateral value at the time the loan is placed on the books, to
continuously inspect the collateral to determine its condition, and to impo a curtailment requirement sufficient to keep collateral values in line with loan
balances.
Two important facets of the bank’s relationship with a dealer are the quality of the paper generated and the deposit account maintained. The income derived
from a floor plan loan may not be sufficient to justify the credit risk. A bank
often looks to the additional income derived from good quality loans to
purchars of the dealer’s inventory. If the bank is not receiving an adequate
portion of loans generated by the dealer or if the paper is of inferior quality, the relationship is of questionable value to the bank. The deposit account
reprents both a compensating balance and a tool by which the loan officer
can monitor customer activity. A review of the flow of funds into and out of the account may reveal that inventory has been sold without debt reduction, that
the dealer is incurring abnormal expens, or that unreported diversification,
expansion, or other financial activity has occurred that might warrant a
reconsideration of the credit arrangement. Token or overdrawn balances should
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Comptroller’s Handbook Floor Plan Loans (Section 210)
trigger incread collateral inspections.
In most banks, the evidence of debt is the trust receipt. There generally are two methods by which trust receipts are created. The bank may enter into a drafting agreement, similar to a letter of credit, with the manufacturer. In this situation, the bank agrees to pay documentary drafts covering shipments of merchandi to the dealer. The drafts are payable at the time the merchandi is received or, if the manufacturer permits, after a grace period which allows the dealer to
prepare the inventory for sale. The drafting agreement usually provides a clau for cancellation and limits the number of units, the per unit cost, and the
aggregate cost that can be shipped at one time. The restrictions tend to
prevent a manufacturer from forcing excessive inventory on a dealer They also permit the bank to cancel or suspend shipments of unwanted merchandi.
Drafting agreements frequently are made in conjunction with repurcha
agreements under which the manufacturer agrees to repurcha merchandi
that remains unsold after a specified period of time. The merchandi and
related title documents remain with the dealer until sold and are evidenced by a trust receipt. All the documents should be inspected physically during the floor plan inspection to prevent dual financing.
Trust receipts also are created when merchandi is shipped under an invoice
system. The dealer receives the merchandi accompanied by invoices and
titles, where appropriate. The dealer prents the documents to the bank and
the bank pays the invoice, attaching duplicates of the documents to a trust
receipt that is signed by the borrower. Depending on the type of inventory
and/or the dealer, the title may remain in the bank or be relead. Ud car
inventories usually are financed under trust receipts with a listing of the units
and their loan values attached to the receipts. The method of perfecting a
curity interest varies from state to state, and there are numerous divergencies from the Uniform Commercial Code. The examiner should determine that the
curity interest has been properly perfected.
With title documents and collateral in the posssion of the borrowing dealer, the bank must have an established procedure for flooring verification. Flooring check sheets should be on file in the bank, indicating that a bank reprentative has personally verified every article, by rial number and description, shown
by bank records as unsold and in the dealer’s posssion. The condition of the floored articles must indicate that they are available for sale. Any missing
articles or other exceptions revealed by the flooring check, as well as the
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Floor Plan Loans (Section 210)Comptroller’s Handbook
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dealer’s explanation thereof, must be verified as proper. Missing items
reportedly sold and unpaid must be verified to related contracts in process, and such processing time must be reasonable. Floored items sold and not in process of payment reprent breach of trust by the dealer, and the amounts owed
reprent uncured credit.
An inherent weakness in any floor plan loan is the banker’s inability to exerci full control over the collateral. The examiner must determine whether the
banker is verifying the collateral, that is, the inventory being financed, on a
frequent basis. The scope of inspections must be sufficiently broad to detect
irregular activity. Inspection duties should be rotated among the department’s
staff, and the floor planned inventory should be verified by the audit department during the regularly conducted audits.
A rious warning signal is evident when inventory has been sold and the
bank’s loan has not been repaid. If inventory is missing at the time of each floor plan inspection and the dealer then remits, it is a sign that the dealer may be
taking advantage of a float, i.e., using proceeds of inventory possibly sold
weeks before the inspection rather than remitting promptly as required. There
are very few examples of dealers lling inventory “out of trust” which are
permitted by bankers. Dealers lling in large volume are usually granted a
three-day leeway before proceeds from inventory sold are required to be
received by the bank. This permissible time lag allows the dealer to conduct the amount of necessary bookkeeping at his place of business. If it is disclod that
a dealer is deliberately withholding funds received from the sale of pledged
inventory collateral, the bank should terminate the customer relationship
immediately.
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Becau loan advances are made on 100 percent of the collateral value, as the
collateral begins to depreciate, the individual loan amounts should be curtailed.
The collateral may depreciate if ud as a demonstrator, is no longer a current-year model, or was previously owned (ud) when floor planned.
A typical dealer of any product must maintain a reasonable inventory. It will
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结果英文generally be the dealer’s principal ast, and its acquisition will normally create the dealer’s major liability. The dealer’s financial statement must show an
inventory figure at least equal to the related flooring liability as of the date of
furtherthe financial statement. Unless the difference is reprented by sales
receivables, including contracts in transit, a flooring liability that is greater than the amount of inventory is an indication that the dealer has “sold out of trust.”
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Comptroller’s Handbook Floor Plan Loans (Section 210)
A dealer who, by diverting the funds received, has sold portions of his
merchandi “out of trust” leaves the bank with a portion of its flooring line on an uncured basis.
Situations where the bank only finances a portion of the dealer’s floor plan debt originating from a particular manufacturer or distributor should be avoided.
Bankers are able to exerci only minimum control over financed inventory
under the best arrangement. Delinquent notes, either unpaid interest or lack of required curtailments, and maturities extended beyond reasonable expectation are warning signs. The signs indicate that the dealer is hard presd for liquid working capital and should alert the banker to conduct collateral verification
inspections more frequently. Slow moving inventory, other than farm
equipment or other asonal merchandi, could be a sign of poor management on the part of the dealer.
The credit review of floor plan loans usually is assigned to the examiner who
apprais indirect dealer lines in the installment loan department. Before the
credits are transferred to the examiner performing the review of credit files, the floor plan examiner should have performed all procedures related to the
existence of the related collateral and its value. The bank’s policies and
procedures should be clearly defined with compliance noted. Controls over the borrower must be in evidence. Collateral values should be supported by source documents or bank appraisals. Any deficiencies within the department must be discusd with management by the examiner in charge of “Floor Plan Loans”
before the review of credit files is undertaken.
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Floor Plan Loans (Section 210)Comptroller’s Handbook
