What the DMV licenses
The California DMV's Occupational Licensing branch says that a manufacturer, distributor or dealer license is needed to sell automobiles, commercial vehicles, motorcycles, trailers, recreational vehicles and buses, and it lists items that fall outside those categories, such as forklifts, golf carts and implements of husbandry. The branch also administers an Electronic Lien and Titling program. For one narrower case it states that a used-vehicle dealer license is required if a converter buys a vehicle from a dealer and resells it.
Licensing details, fees and bonding or location requirements are set by the DMV, and this page does not list them. Confirm with the DMV which license fits what you plan to sell before you sign a lease or buy inventory.
Why inventory is the real capital question
A dealer's largest asset is cars on the lot. Each one is cash paid to an auction or a seller that comes back only when a customer buys it, so the question is how fast the lot turns.
| If the lot turns | Then cash behaves like this |
|---|---|
| Quickly | Money returns and can be spent on the next vehicle; a small cash base goes a long way |
| Slowly | Money stays parked; each additional car needs fresh cash |
| Unevenly | Some vehicles sell on day one and others sit; the slow ones are the problem |
The cars that linger cost more than they appear to: advertising, reconditioning, insurance on the lot and the opportunity cost of capital that is not buying a fresher vehicle.
Gaps that nobody warns you about
- Reconditioning. Tires, brakes, detailing and small repairs are paid before the car is sale-ready.
- Title and paperwork delays. A sold car whose paperwork is delayed delays the cash.
- Customer financing timing. When a buyer finances through a third party, the dealer waits for the funds to arrive.
- Seasonal dips. A slow month leaves payroll and rent running while sales do not.
What working capital is, and is not
A floor plan is a specialised inventory credit line, and it is a different product from what is described here. Working capital does not replace one, and nothing on this page suggests that we offer it. What working capital can cover is the cash needs around the lot: reconditioning, advertising, payroll in a slow month, or the deposit on a better location.
Working capital from $25,000 to $5,000,000 is available, funded in as little as 24 hours. FICO scores of 500 and up are considered, the file centres on about three months of bank statements, and no tax returns are required. The credit pull is soft and sole proprietors can apply, which covers many independent dealers. Approval is not assured for any applicant. The application takes about five minutes.