Cross Border Consignment Mechanics under UNCITRAL Model Law Rules
Under UNCITRAL Model Law rules, consignors secure inventory priority against competing creditors by registering a public notice before the buyer receives physical possession.
Floor Plan Financing
Meaning
Asset-backed revolving credit lines enable equipment distributors and vehicle dealers to fund wholesale inventory acquisitions. Under a standard distribution agreement, floor plan financing provides specialized capital where lenders pay manufacturers directly upon product shipment. Title or security liens remain with the financing entity until the dealer sells the unit to an end customer and remits the wholesale principal.
Scope covers high-value durable goods, agricultural machinery and automotive inventory sold through franchised dealer networks.
Collateral Control
Lenders perform unannounced physical audits at dealership premises to confirm the physical presence of financed inventory. Missing units trigger immediate repayment demands to prevent unauthorized off-book sales.
Interest Structure
Debt servicing costs depend on benchmark rates combined with wholesale holding durations across retail display periods. Manufacturers often subsidize initial financing interest through curtailment programs to encourage dealers to carry larger floor stock. Extended inventory residence times erode dealer profit margins as interest expenses accumulate against unsold units.
Wholesale price adjustments help balance inventory holding costs during seasonal demand drops.
Default Recourse
Repossession rights activate immediately when a dealer fails to remit proceeds following retail unit sales. Lenders maintain repurchase agreements with original manufacturers to guarantee wholesale debt clearance if dealer defaults occur. Repurchase commitments obligate manufacturers to buy back repossessed stock at predetermined residual values.
Secured credit structures insulate lenders from general trade creditor claims during dealer insolvencies.