What Is Floor Plan Interest

Account 076 interest floorplan is es tablished to record the interest charges on vehicles in inventory financed under the dealership s floorplan line of credit.

What is floor plan interest.

Example 1 record the accrual of floorplan interest for the current month in the amount of 9 183. Specialty lenders traditional banks and finance arms of manufacturers provide the. Business interest in excess of the limitation can be carried forward indefinitely. Floor plan lending is a form of inventory financing for a dealer of consumer or commercial goods in which each loan advance is made against a specific piece of collateral.

As soon as that vehicle sells to a consumer floor planning dealers have the ability to immediately realize profits pay back the initial value of the loan plus interest and fees and had the flexibility to keep their funds working for their dealership. An interest rate floor is an agreed upon rate in the lower range of rates associated with a floating rate loan product. A business can deduct its business interest only to the extent of the sum of its business interest income 30 of its adjusted taxable income and its floor plan financing income. Interest rate floors are utilized in derivative contracts and loan.

With a floor plan the initial investment needed to buy a particular unit is a fraction of the vehicle s actual purchase price.