Floorplanning Venture Inches Toward IPO

A de novo dealership floorplanning continues to move toward an initial public offering — albeit a small one. Today, Lincoln Floorplanning Co. Inc. filed its fifth amendment to its first IPO filing in December. No offering date has been set yet for Lincoln.

Lincoln is a new venture. Daytona Beach, Fla.-based Lincoln has never earned a penny of revenue from operations and it won’t until capital is raised. The company had about $7,500 in its bank account at the end of last year.

And yet, the company is a sign of something brewing in auto finance, and that is expansion in the used car segment. According to the company’s offering documents, “Lincoln’s strategy is to market its services to smaller dealers, auto auctions, and independent used auto dealerships where larger banking and financial
institutions are not interested. Approximately 4,000 potential customers meeting this description exist in the states of North Carolina, South Carolina, Georgia, and Florida. Lincoln will fund floorplanning of used car inventory. After establishing its floorplan operation, it intends also to buy used car purchase contracts from buy here pay here dealers who are using Lincoln as the dealer’s floorplan financer.”

There’s been more of a buzz around the used car market lately, especially since there are expectations that some spurned Chrysler and GM dealers may find their way to the independent dealership scene. Lincoln lists as its competitors Bank of America, GMAC, and Chase, as well as “smaller floorplan finance companies” Auto Use, DSC, and Flex Funding.

Lincoln is being founded by Timothy L. Kuker, Steven G. Salmond, and Ronald S. Worl. Kuker and Worl together own a dealership called T&J. T&J has been testing Lincoln’s products and services.

Lincoln is looking to raise $2 million of which Lincoln wants to extend $1 million in floorplan financing. The company says it needs $160,000 to cover its 12-month cash burn rate.

Lincoln expects to have attracted a minimum of 25 dealerships upon completion of the first full year in operation. Here are the numbers: The 25 dealerships are expected to generate $781,500 in annual gross revenue for Lincoln, of which $357,000 is from processing, $394,500 is from interest and $30,000 is from auto audit fees.

According to the prospectus, after $200,000 for the cost of money at 8%, G&A expenses of $123,840 and audit fees of $30,000, Lincoln is expecting to net about $428,00 per year. In other words, Lincoln thinks it can make money in floorplanning, and with all the negativity surrounding auto finance over the last year or two, that’s a welcome sentiment indeed.

* Lincoln Floorplanning Co. Inc.’s amended S-1 dated June 22, 2009