Floorplan financing is growing for some lenders even as others step back amid elevated interest rates on the heels of three turbulent pandemic years.
Several banks, including Capital One and Fifth Third Bank in March, have pulled out of floorplan financing to prioritize more profitable business lines.
Other floorplan lenders are capitalizing on the pullbacks and remain bullish on portfolio growth. In the independent dealer floorplan finance space, First Business Bank and NextGear Capital have both seen opportunities to grow their dealer base in light of other institutions shifting priorities.
“This year has been very active in terms of dealers seeking us out to provide floorplanning, and that’s because some of our competitors have become stricter on their underwriting,” Jeff Widholm, managing director of floorplan financing at First Business Bank, told Auto Finance News.

First Business has funded new floorplan lines of credit with a “couple” of large independent dealers that needed financing when other institutions scaled back, Widholm said, without naming the dealers.
“We’re bringing on new dealers every day,” he said. “We are selective in our underwriting standards and looking for the highest quality dealers in the marketplace. We’re looking for strong balance sheets and historical earnings performance and longevity in the business, along with fast inventory turns and strong debt service coverage ratios.”
First Business Bank’s floorplan lending portfolio sits at just under $100 million, Widholm said. Its portfolio has remained strong as the lender has “not experienced any degradation in credit quality or performance of the dealers handling their account,” he said.
NextGear Capital, too, has grown its dealer base despite challenges facing the floorplan financing industry, President Scott Maybee told AFN.
“A lot of the traditional banks are getting out of the space, so that’s been an opportunity for us to … show that consistency,” he said. “In these times, you always want to be focused on growth, and we’re still investing in our dealer base. One way is to help the clients that want to grow [identify] what metrics they need to focus on.”
– Scott Maybee, president of NextGear Capital
NextGear Capital provides its more than 20,000 dealer clients with a variety of services, whether they are new to the space or have been in the business for decades, Maybee said.
The lender created a mobile app in June so its independent dealers can check floorplan credit availability, learn how long vehicles have been in inventory, how much interest they pay per unit and when payments are due — while out of the office.
NextGear also offers a program for first-year independent dealers in which a portfolio manager offers advice on how to operate and price inventory.
“We want to finance the brand-new dealer because then we start a relationship with them,” Maybee said.
NextGear is working to further build relationships with dealers with the goal of becoming the exclusive floorplan provider for more clients, Maybee said.
“In the independent space, you might have one to three floorplan providers, and we’re having conversations now with all our dealers to say, ‘What would it take to become exclusive with you?’” he said. “We’re in growth mode.”
NextGear Capital’s portfolio has performed better than anticipated as losses have come in below expectations, Maybee said, declining to provide specifics.
That is “a testament to our independent dealers,” he said. “They’re cautious about what they buy, keeping cash in reserves, and doing a phenomenal job running their businesses.”
Dealer consolidation boosts portfolio growth
Meanwhile, an increase in dealer consolidation over the past few years has contributed to client and portfolio growth for larger floorplan providers.
Dealership buy and sell activity remained strong in the second quarter following a pickup in acquisition activity in 2021 in tandem with soaring dealership profits and valuations. The number of dealerships bought and sold in Q2 came in at 143 rooftops, up 13% quarter over quarter. In the first half of the year, 270 dealerships have been bought and sold, down 6% compared with the first half of 2022, according to the latest auto retail trends report from Fort Lauderdale, Fla.-based investment bank and dealership buy-sell adviser Haig Partners.
New York-based Chase Auto, for one, saw its commercial portfolio grow as some of its dealer base acquired more rooftops, Charles Arnold, national sales executive for commercial dealer services, told AFN.
“When liquidity hit the market a couple of years ago, dealers wanted to sell and dealers wanted to buy, so we had to be available for them to expand in that space,” he said. “Our priority is taking care of our existing customer base, and with that comes opportunities for growth.”
When inventory shortages were impacting the industry, Chase Auto adjusted how much credit a dealer could access based on its their utilization rate, Arnold said.
“With managing floorplan lines … do we need to keep lines available when they’ve got a 20% utilization versus a 75% in normal times?” he said. “The answer is no, but you want to be able to provide the dealer with the same services and the same pricing.”
To address that issue, Chase developed a tool that lowers a dealer’s available line of credit when inventory is low and raises it without having to go through the credit approval process when inventory rises again, Arnold said. Utilization rates remain low compared with pre-pandemic levels, he said.
“We are not back to the [utilization] levels that we were pre-COVID when you had the strong 70% to 80% utilization,” Arnold said. Utilization rates are growing “nice and steady, and it’s off its low point. We’re about midway up, and we don’t expect that to change.”
Columbus, Ohio-based Huntington Bank also is benefiting from dealer consolidation, with its floorplan balance increasing in the second quarter.
“For the right customers, we are looking to grow our commercial business,” Rich Porrello, president of auto finance and dealer services, told AFN. Huntington has had a “really strong” year adding floorplan clients, he said, without providing specific numbers.
“The commercial auto business for Huntington has been a growth business for many years, and it continues to be a primary focus for us to grow and support our dealers,” Porrello said. “Our focus hasn’t changed. It’s a great business for us.”
– Rich Porrello, president of auto finance and dealer services at Huntington
Huntington’s Q2 auto floorplan balance increased by $175 million QoQ, Zach Wasserman, senior executive vice president and chief financial officer, said during the company’s earnings call in July.
The pandemic “took floorplan line utilization down significantly with the chip shortage,” Porrello said. “Through COVID, we continued to add new customers. Our balances weren’t growing because line utilization was so low, but we continue to add new customers and we’re starting to see balances go back up … which is a sign of both adding new customers as well as floorplan utilization going up.”
Huntington added more dealers to its client base as a result of dealer consolidation over the past two years than it lost, he said.
“We choose to do business with a lot of the dealers that are consolidators,” Porrello said. “They’re consolidating, and because of that our relationships are growing. We lend to many of the top 50 dealers in the United States, so that has caused us to grow over the last few years.”
Meanwhile, Huntington has not made any major adjustments to its floorplan underwriting processes, he said.
“Client selection is important; 2021 and 2022 were record profitability years for dealers,” Porrello said. “Interest rates and higher levels of inventory are impacting [profitability this year], but overall in 2023 dealers continue to perform well, so we haven’t changed our standards or underwriting.”
Elevated dealer profitability is contributing to strength across Huntington’s portfolio as dealers are staying current on payments, Porrello said.
“There’s a concern, given interest rates are going up, but overall there’s a relatively positive sentiment from dealers on the future,” he said.
Ally Financial also increased its Q2 floorplan outstandings to $14.6 billion, up 9.8% QoQ and 32.7% year over year, according to its earnings supplement.
GM Financial floorplan penetration hits 45%
Dealer consolidation has helped GM Financial grow its base of dealers, Joe Bartuch, executive vice president of U.S. sales and credit at the captive, told AFN.
“Consolidation has presented challenges for the industry, but it has also created opportunities for GM Financial to expand our portfolio in this segment,” he said. “We’re fully invested in GM dealers’ business, and our job is to ensure they have the ability to continue to do business.”
GM Financial grew its floorplan financing portfolio by 48% from the start of 2020 to the end of 2022, Bartuch said, noting GM Financial provides floorplan financing to 45% of General Motors dealers.
“We became the No. 1 floorplan provider for GM dealers, but we’re not done,” he said. “We’ll continue to grow for the right opportunities.”
The captive financier’s dealer dividend program has helped it grow its portfolio, Bartuch said. The program offers cash-back rewards to dealers for sending the captive new- and used-retail installment contracts. The more contracts GM Financial funds, the greater the rewards a dealer receives.
Ford Credit grew its dealer financing portfolio to $30.1 million at the end of the second quarter, an increase of 36.8% YoY, according to an AFN analysis of Ford Credit’s 10-Q reports.
Meanwhile, utilization rates have risen across GM Financial’s portfolio, which continues to perform well while dealer margins remain elevated, Bartuch said.
“We’ve seen no issues for the dealers as a whole,” he said. “There’s obviously a concern with the cost of funds going up for all lenders and all floorplan providers, … but margins are still strong as a whole across the industry. Compared to where they were prior to the pandemic, dealers are in a better position from a return basis.”
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