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.

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. Example 1 record the accrual of floorplan interest for the current month in the amount of 9 183. An interest rate floor is an agreed upon rate in the lower range of rates associated with a floating rate loan product. What you don t realize is that like most new car dealers a floor plan was used to finance the cars.

Floor planning is a form of retailer financing for large ticket items displayed on showroom floors or lots. Interest rate floors are utilized in derivative contracts and loan. Simply it is a way for an auto dealer to use a lender s funds to finance the cars and until each of them is sold the lender holds title to the cars. 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.

Business interest in excess of the limitation can be carried forward indefinitely.