6. DEALER FINANCED RECEIVABLES

Dealer financed receivables are receivables for loans that we make to independent retailers, or dealers, for the purchase of manufactured homes so that dealers can then market them for sale to consumers. The loans are part of our inventory finance program. In late 2022 and early 2023, the Company transitioned many of its dealers from a traditional consignment arrangement to an inventory finance arrangement. The terms of the financing typically include a three year term, a monthly interest payment, an annual curtailment payment and require the retailer to pay the principal amount of the loan to the Company upon the earlier of the sale of the home by the retailer to its customer or the end of the term.

Dealer financed notes receivable, net of allowance for loan losses, consisted of the following (in thousands):

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The following table presents a detail of the activity in the allowance for loan losses (in thousands):

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The allowance for loan losses reflects management’s estimate of losses inherent in the dealer loans that may be uncollectible based on review and evaluation of the dealer loan portfolio as of the date of the balance sheet. An allowance for loan losses is determined after considering, among other things, the loan characteristics, the financial condition of the dealer and the value and liquidity of collateral.

We evaluate the credit quality of our dealer financed receivables based on the length of time the Company’s collateral has remained unsold by the dealer in dealer inventory. This table reflects the age of the loan receivable due (in thousands):

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