What Happens to Your Dealers When a Floor Plan Lender Exits

Capital One and Fifth Third both left dealer floor plan lending in 2023. Capital One said the business was about 1% of its commercial bank and wasn't core to that unit's long-term priorities, according to Bloomberg Law's reporting. Fifth Third said it would no longer support the product, while still serving dealers elsewhere in the bank (Kerrigan Advisors covered both).

Those were auto exits, but the lesson travels. To a bank, your dealer program is a line item. To you, it's the sales channel. When those two views collide, the bank's view wins. It usually wins on the bank's timeline too.

Every manufacturer whose dealers depend on one lender's appetite should have a replacement plan before it needs one. Most don't, because the program worked fine right up to the letter.

A cap and an exit are different problems

A cap is the quieter of the two. The lender stops growing lines, or stops adding dealers, or freezes the program at current balances. Nothing breaks on day one. Then stocking season arrives and lines can't stretch. New dealers you signed in the fall can't get set up. Orders shrink to whatever each store can carry. Your sales plan stays the same, so the gap shows up as units nobody ordered.

An exit is harder. Units already on the line have to be paid down or moved, and the lender sets the pace. Some let existing units pay down as they sell. Others want the book moved by a date. Which one you're dealing with sets the timeline for everything else.

The first 30 days

Get the change in writing. Is it a cap, a pause on new dealers or a full exit? What's the effective date? What happens to units already on the line, and to units in transit? A lot of manufacturers learn about a cap from a dealer, which is the worst possible order.

Map who it hits. List your dealers by line size and by how close each one runs to its limit. The dealers running close to their limit in your busiest month are the ones who'll feel it first. A new lender will ask for that list before anything else, so you might as well build it now.

Talk to your dealers before their bank does. A dealer who hears "we're working on a replacement program, here's the timing" stays calm. A dealer who hears nothing starts shopping your line to its own bank, one store at a time.

What a replacement lender asks for

We've run a floor plan program from the lender's side, so we know what a new lender asks for first. It's the same short list almost every time:

• The dealer list with current balances and line sizes.
• Aging: how long units have sat, and how many are past their curtailment dates.
• Audit history, including any dealer that came up short on a count.
• The repurchase terms you're willing to sign, and what the current lender had.

None of that is exotic. But pulling it together while your current lender is winding down, and while your own team is fielding dealer calls, is where weeks disappear. Start the spreadsheet before you start the calls.

Bring a few questions of your own, too. Will the new lender floor every line you make, used units included? What about attachments? How do curtailments work in your slow months? Who services the accounts day to day, and how do dealers reach them? The answers tell you more than the rate sheet does.

Moving dealers without moving them one at a time

Each dealer has to apply for a line with the new lender. That part doesn't go away. What you can avoid is fifty dealers each starting from scratch with fifty different banks, on fifty different schedules.

A replacement program runs onboarding in one place. Dealers apply on one page with your name on it. The lender makes the credit decision on each dealer. Approved dealers get a line and a portal at the same time. Units in transit can move to the new line as they land, instead of sitting in limbo between two lenders.

Timing still depends on the lender's review and the size of your network. Starting before your busy season gives dealers the most cover. Starting after it gives them almost none.

If you're the lender winding down

Sometimes the call comes from the other side. A bank or finance company decides an OEM book doesn't fit anymore and needs somewhere for those manufacturers and their dealers to go.

Some of our lender clients are in growth mode and looking for new OEM programs. If you're moving OEMs and their dealers off your book, we can help find them a home that keeps the dealers whole.

Quick answers

Will our dealers have to reapply? Yes. Each dealer applies for a line with the new lender. Onboarding still runs in one place on one schedule.

Does Vero lend the money? No. The lender underwrites and signs every dealer and funds the line on terms it sets. We run the program day to day inside the limits the lender sets.

If your dealers are maxed on your own open-account terms rather than a bank's line, that's a related problem with a different fix: moving dealers off net terms.

Vero runs floor plan programs for lenders on VeroOS. If your lender capped or exited your program, see how manufacturers keep stock moving, and you can tell us what changed.