Improve Cash Management With a Sweep Line of Credit
As your business grows and diversifies, cash management can become more challenging. Larger transactions command longer payment terms, multiple accounts require more work to reconcile and seasonal surges uncouple receipts from payments, forcing you to navigate between overworking your line of credit or overdrawing your checking account.
Coveted Financial Services, a Chicago area consultant, works to facilitate relationships which are right for both lender and client at every stage of growth. For many of their larger corporate clients, the ideal cash management solution is an automated sweep line of credit.
In a credit sweep arrangement, the bank automatically transfers (or in banking jargon, sweeps) excess funds in a checking account, when deposits rise above an agreed threshold, to pay down the customer’s line of credit. The credit sweep may also work in other direction, automatically moving cash from the line of credit to the checking account, should the balance fall below an agreed level.
If your business is large enough to have multiple accounts, a high number of transactions or high fluctuation in deposit levels, a sweep line of credit may be right for you. Here are the main benefits:
Convenience -- The automated functions reduce the need to make manual transfers, saving you time.
Efficiency – In addition to less time reconciling accounts, the automated transfers speed up cash flow.
Security -- The credit-to-deposit function eliminates the risk of overdrawing your checking account.
Savings – The deposit-to-credit function limits your draw on the credit line, reducing your interest.
Based on each client’s unique requirements and objectives, there are specialized forms of sweep arrangements with many other purposes and benefits. For example, some accounts sweep extra funds into a money market or other investment account, putting idle cash to work.
To explore whether a sweep line of credit would be beneficial for your business, give us a call or send us an email.