Used Car Dealers
6 Questions When Floor Plan and MCA Claims Overlap

The lot cannot pay two creditors with the proceeds of one sale, and the dealer who promises the same money twice will answer for the second promise first. Competing claims on inventory, receivables, and sale proceeds must be traced to their documents before the next payment leaves the account.

Floor plan auditors count cars on a Tuesday and reconcile the count against a schedule the sales staff has never seen. The financing picture at a dealership is usually clearest to the visitor with the clipboard, which is why the dealer should learn to read the lot the same way.

1. Match Each Vehicle to Its Financing

The vehicle schedule decides nothing by itself, so the first task is to build one that identifies ownership with the documents behind each acquisition on a lot carrying something like forty units across owned inventory, consigned vehicles, and stock subject to financing arrangements. Attach the account statements with payment histories.

Read the floor plan documents for the obligations that attach when a unit sells. The title of no article and the habit of no sales desk can supply a universal payment rule, so the sale triggered amounts with their timing must come from the lender papers rather than from custom.

Often we see the MCA demand answered before the floor plan statement has been read. That order should run the other way, because the lender that funded the inventory usually holds the first documented position in the unit.

2. Read the MCA Claim Against the Collateral Description

And the MCA agreement usually claims a different slice of the same operation. The documents may describe purchased receipts while adding a separate grant of security, and counsel should review and analyze those terms before treating a broad financing statement as a claim to every vehicle on the ground.

New York UCC Section 9-315 addresses the continuation of a security interest after disposition with attachment to identifiable proceeds, subject to exceptions. The provision announces no universal winner between a floor plan lender and an MCA provider, and priority should never be inferred from the size of an advance or from the fact that one creditor funded the inventory acquisition.

When the governing jurisdiction, the collateral descriptions, and the relevant agreements are assembled, with each filing laid beside the security agreement that supposedly supports it, the comparison takes longer than an afternoon, and the answer it produces will survive questions from both creditors.

A filing and the underlying security agreement perform different roles. The existence of a financing statement resolves neither the claimed balance nor every question about enforceability, and most blanket filings are addressed to the dealer imagination rather than to specific collateral.

You floor the cars with one lender and then you discover the advance company photographed the same lot. The dealer should still trace each sale to its payment, even where a Saturday mix of cash deals, drafts, and lender wires in one account must be sorted into proceeds of particular units.

The MCA filing reads as a blanket. It covers only what the signed description conveys.

3. Keep Customer Contracts Apart From Dealer Financing

For a dealer holding customer installment contracts, identify the owner of the payment rights with any agreement affecting those rights. Retaining the paperwork does not mean the dealership can transfer or pledge the account without further review, so protect and preserve the payment history exactly as received.

An extremely long installment contract still answers only the questions its pages address. The customer agreement may raise consumer law questions even though the dealer MCA is commercial financing.

A demand involving customer payments should be reviewed before the dealer changes collection instructions. Obtain the exact notice, determine which accounts it identifies, and answer that notice rather than the general anxiety the phone calls produce.

A letter redirecting customer payments feels efficient until the first borrower calls the lot confused. Fourteen pages of retail paperwork can govern a single account, and none of those pages authorizes the dealer to improvise.

The funder requests the redirection in order to collect without awaiting the dealer accounting. Our files suggest the pattern; they do not measure it.

4. Build a Sale Proceeds Budget Before Offering Settlement

The settlement conversation should open only after a sale proceeds budget shows what each disposal yields once the floor plan paydown is honored. The money is already spoken for before the settlement letter is drafted wherever the lender documents assign it, and the budget must reflect that assignment.

Because the same dollar cannot satisfy a sale triggered paydown and an MCA installment at once, the proposal should be funded from the remainder the documents leave the dealer. Payments remitted, or not remitted, during negotiation change the payoff underneath the offer.

Resist the urge to fund the settlement from a sale whose proceeds the floor plan already claims. The budget ensures the offer never spends a dollar the documents assigned elsewhere, and an offer built on already claimed proceeds will collapse at the first creditor conference.

5. Ask Delancey Street About the MCA Portion

Delancey Street can assess the MCA component through its merchant cash advance settlement service, which offers a free review at the outset. Provide the vehicle level schedule with the actual source of any proposed settlement funds.

The company is a debt settlement provider, not a law firm. Independently licensed counsel must address priority, the transaction documents, and legal representation before any proposal reaches either creditor.

Confirm the service fees with the obligations included. Floor plan debt with customer contract questions should not be assumed to fall within an MCA settlement engagement, and an extremely common error is promising the MCA payment from the next retail sale.

No provider can ensure creditor acceptance. The review ensures the MCA figure fits the remainder the lender documents leave available.

6. Require Releases That Match the Transaction

The closing of any settlement should produce documents that match the obligations closed: a receipt for money, a release of the asserted security interest, and a separate release of any individual undertaking. No assurance to either lender, even casually, should describe the releases as complete before the documents are signed.

New York UCC Section 9-513 governs termination statements under stated conditions, and counsel should identify the applicable procedure for the particular filing rather than assume payment alone clears the record. That is the document the next dispute will open.

Simply retain the executed releases with the final ledger and the payment confirmations. The objective is to ensure every release matches the obligation it closes.

The auditors return on a Tuesday either way, and the schedule should be ready before they arrive.