New to the game! Independent Dealers HELP Please!

[jkathary171]

Hello Everyone,
I am new to the Dealer World. Currently, I am in the process of taking over a Independent Used Auto Sales operation. The current owner has been in the field for 12 years now. He started with the lot that I am taking over which can hold approx. 40 to 50 vehicles. He then built a bigger lot that could hold over 100 vehicles, ran it for about 6 years, and sold it to his GM. He then reopened the lot that I am now in the process of taking over about 2 1/2 years ago with the intention of handing it over to his son. Well, his son wants nothing to do with it. Since I was in the process of opening my own lot, he offered myself and my business partner ownership of his business. Basically, I take the business name, and lease the lot with the first 3 months free. The only kicker is I have to obtain a Floor Plan to take over his current inventory of just over 200k. He's giving us the inventory at cost. This has been the hurtle of all hurtles to over come! I started with the small town bank that he uses for his floor plan. First the guy I spoke to told me he seen no problem with giving us our own floor plan, and transferring the titles to us. He said he only needed approval from his boss. Then I get a phone call saying that they are going to require at least 40% collateral. So, my business partner and I came up with about 48% Collateral on 200k. Then I get a phone call stating that they don't feel that its in the best interest of the bank to present our request to their board. So now I am stuck trying to find a floor plan company that will work with us. I figured that since the lot has a great reputation in our area, and has been a very profitable business to begin with, that we would not have a problem with the financing. However, I was wrong. So, if anyone can help with some idea's on how to obtain a floor plan of at least 200k? I need some ideas! I am currently working with a lady from our local college that helps small businesses obtain loans. However, her main resources does not focus on floor plans. Only general small business loans. We are creating a business plan to present to other financial companies. Does anyone have any other advice, or information that could help me throughout this process?

 

[jkathary171]

Let me add a little more information that may help with this matter. Currently my credit score is only a 645 according to Equifax. I don't have a whole lot of a credit profile to go off of. Only 1 credit card that's been open for 5 years with no missed payments, and federal student loans. My partner however, has multiple loans and credit cards, all on time payments for years. No collections, but his credit cards are all close to their credit limits accept 1 which has nothing on it. I know this has been dragging his score down into the mid 600's also, when last year it was in the mid 700's. Regardless though, he has no missed payments, everything is on time. We also have collateral. approx. $70,000 in a house with a little property, and a little over $20,000 in equity with the current house he lives in. The lot we are attempting to take over is located in Byesville, Ohio. I have pictures of the lot if anyone feels that they need to see what I am working with. Hopefully this helps a little with being able to direct us in the right direction! Thanks in advance, Jamie.

 

[jkathary171]

I already have a whole list of companies that specialize in Floor Plans. What I am looking for is advice and information relating to which companies are the easiest to work with, have the lowest rates, have the dealers best interest in mind, and have the lease amount of requirements for lets say a $225,000.00 floor plan line of credit! Please, any information or advice would be greatly appreciated! Also I have thought about Credit Unions in Ohio. Does anyone know of any Ohio Credit Union's that offer Floor Plans?

 

[Tallcool1]

Floor Plans are really tough for Independent dealers.

The best bet is to get a Line Of Credit at a local bank. Offer your house, 401K, wife, children, and anything else you can get your hands on as collateral. Seriously. If that doesn't work...

Offer to go to work for the guy that you are trying to buy out. I assume that he is the owner of the property. Tell him you will pay him his lease every month, and will pay him 10% on the inventory. He will make a little on the floor plan. If that doesn't work...

First think long and hard...really long and hard...about how confident you are that you can turn your inventory in 90 days. When you enter a relationship with a true "Floor Plan" company like Next Gear, Carbucks, etc., you are climbing in bed with the Devil. Make no mistake, you WILL assume the bottom position in that bed. The capital it takes to keep up with those companies is significant. When the curtailments (reductions) come, there is nothing you can do about it. They will fee you to death. They will make your life a living hell with floor plan audits, and title holds. The floor plan company will be running your business, you will not. Every decision you make will hinge on that floor plan.

I have many friends that have success with these floor plans, but more have failed than succeeded. The key is working capital. The ones that can get along with floor plan companies are full of cash. If you are well capitalized, it can work.

Good luck to you!

Clint

 

[jkathary171]

Just an update! The local banks want at a minimum of 6 months bookkeeping, bank statements, ect; before they'd be willing to work with me on a floor plan. However, Nextgear contacted me Friday, and notified me that I was approved for $225,000.00 Floor Plan "Which is just enough to cover the current inventory and take over ownership of the lot" I would have to say, that was the easiest company to work with "so far" and FAST. I had an approval within 24 hours of submitting the application. The current owner and I spent the day transferring everything into my name "Utilities, carsforsale.com, Cargurus, Lot Insurance, Frazer, and a couple other programs. So, it looks as if this is happening! The owner also offered me free rent until Jan. 1st "Just so I have time to create some revenue". I had mentioned to him my interest in buying the lot from him in a couple of years, once we had enough proof for the banks to approve us. He then offered to setup a Land Contract, in a few months, instead of dealing with the banks. Now the only thing I am waiting on is the lawyer to get all the paperwork wrote up so I can sign my life away! LOL. Currently the date set for me to take over is Oct 15th! Now, just to sell some vehicles! LOL

 

[Tallcool1]

Just an update! The local banks want at a minimum of 6 months bookkeeping, bank statements, ect; before they'd be willing to work with me on a floor plan. However, Nextgear contacted me Friday, and notified me that I was approved for $225,000.00 Floor Plan "Which is just enough to cover the current inventory and take over ownership of the lot" I would have to say, that was the easiest company to work with "so far" and FAST. I had an approval within 24 hours of submitting the application. The current owner and I spent the day transferring everything into my name "Utilities, carsforsale.com, Cargurus, Lot Insurance, Frazer, and a couple other programs. So, it looks as if this is happening! The owner also offered me free rent until Jan. 1st "Just so I have time to create some revenue". I had mentioned to him my interest in buying the lot from him in a couple of years, once we had enough proof for the banks to approve us. He then offered to setup a Land Contract, in a few months, instead of dealing with the banks. Now the only thing I am waiting on is the lawyer to get all the paperwork wrote up so I can sign my life away! LOL. Currently the date set for me to take over is Oct 15th! Now, just to sell some vehicles! LOL

Congratulations!

Be sure that you understand your curtailment or reduction schedule. Have a strategy in place to make sure you don't get those curtailments piling up on you. Again, unless you are full of cash!

Good luck to you!

 

[jmartigar]

I'm the same. Come on!

 

[Tallcool1]

Thanks for sharing,Clint,can you share some resources where i can accumulate some new information

I can, but need a little more information so I know what direction to point you in!

Do you currently have a store or are you working toward that?
Where is your store or where is it going to be?
How much Inventory do you have?
Are you offering financing, and if so is it Bank or BHPH?
Floor Plan?
Are you a member of your State association?
What is your background as it relates to Retail Automotive?
Do you have Facebook and if so are you a member of any Dealer Only Facebook Groups?

Clint

 

[Db0610]

Just an update! The local banks want at a minimum of 6 months bookkeeping, bank statements, ect; before they'd be willing to work with me on a floor plan. However, Nextgear contacted me Friday, and notified me that I was approved for $225,000.00 Floor Plan "Which is just enough to cover the current inventory and take over ownership of the lot" I would have to say, that was the easiest company to work with "so far" and FAST. I had an approval within 24 hours of submitting the application. The current owner and I spent the day transferring everything into my name "Utilities, carsforsale.com, Cargurus, Lot Insurance, Frazer, and a couple other programs. So, it looks as if this is happening! The owner also offered me free rent until Jan. 1st "Just so I have time to create some revenue". I had mentioned to him my interest in buying the lot from him in a couple of years, once we had enough proof for the banks to approve us. He then offered to setup a Land Contract, in a few months, instead of dealing with the banks. Now the only thing I am waiting on is the lawyer to get all the paperwork wrote up so I can sign my life away! LOL. Currently the date set for me to take over is Oct 15th! Now, just to sell some vehicles! LOL

Congratulations! What did NextGear require for the approval?

 

[jfmizz]

I already have a whole list of companies that specialize in Floor Plans. What I am looking for is advice and information relating to which companies are the easiest to work with, have the lowest rates, have the dealers best interest in mind, and have the lease amount of requirements for lets say a $225,000.00 floor plan line of credit! Please, any information or advice would be greatly appreciated! Also I have thought about Credit Unions in Ohio. Does anyone know of any Ohio Credit Union's that offer Floor Plans?

Hi @jkathary -- would you mind sharing that list of floor plan providers you mentioned?? Working with a client and it would be a huge help.

Thanks!