What it is
Under a floor plan agreement, the lender expects the boat to sell. If it does not, the lender asks the dealer to pay down part of the balance on a schedule. That payment is the curtailment. Terms differ by lender and by program, so the agreement is the only reliable source.
How it works at a boat dealership
The clock usually starts when the boat is financed or received. After a set number of days, the dealer owes a percentage of the original amount, and further payments may follow at later milestones. Dealer1, a dealer-services firm, notes that units past about 180 days often trigger curtailment payments.
The payment comes out of the dealer's cash, not out of the sale, so several slow units due in the same month can strain working capital.
What dealers watch
Dealers watch the upcoming curtailment dates for every unit, the cash needed to cover them, and which boats should be discounted, moved to another store or promoted before the date arrives.
Why it matters
Curtailments turn slow sales into a cash problem. A boat that is only a little late can still trigger a payment, and the payment arrives regardless of whether a buyer is in sight. For a seasonal business, the timing matters as much as the amount: a curtailment that falls in the slow winter months has to be funded from cash that may be thin. Planning ahead gives the dealer more options than reacting to a bill.
Common mistakes
A frequent error is finding out about a curtailment when the lender's statement arrives. Another is keeping dates in one person's head or calendar. A visible list of units by days in stock lets the sales manager act before the payment is due.