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.

What is floor plan interest.

With a floor plan the initial investment needed to buy a particular unit is a fraction of the vehicle s actual purchase price. Specialty lenders traditional banks and finance arms of manufacturers provide the. What you don t realize is that like most new car dealers a floor plan was used to finance the cars. 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.

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. An interest rate floor is an agreed upon rate in the lower range of rates associated with a floating rate loan product. Floor planning is a form of retailer financing for large ticket items displayed on showroom floors or lots. Example 1 record the accrual of floorplan interest for the current month in the amount of 9 183.

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.