What should I ask about a motorcycle shop’s floor-plan financing arrangements with lenders?

Start with the documents. Ask for each agreement with a lender that funds inventory, plus recent statements. Match the balance to the units on the lot, using serial numbers. Check that every unit the lender funds is still there, and that none was sold without the payoff being made.

Then ask about the terms. How soon must a loan be repaid when a unit sells? Is there interest or a fee for units that sit? Does the lender audit the lot, and what did the last audits find? Ask whether any late payments or warnings have been issued.

Finally, ask what happens at a sale. Lenders often review a new owner, and the line may be reduced or ended. Speak to the lender, with the seller’s permission, before you commit, and ask your accountant to model the cash you would need if the line shrank. Plan your own financing too, as the purchase loan and the stock line affect each other. Your lawyer should read the lender agreements. Keep the shop’s other debts in view when you ask, because lenders often look at the whole picture. A clear list of every loan, who holds security and what each requires will save time later.

Key takeaways

• Match the lender’s balance to the units on the lot, serial by serial.
• Ask how repayment, fees and audits work when units sit unsold.
• Talk to the lender about a new owner before you commit.