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GLOSSARY

Clean-down definition

Published by a LexisNexis Banking & Finance expert

What does Clean-down mean?

A clean down provision obliges the borrower to ensure that there are no revolving credit facility loans outstanding for a period of a few days once or twice a year. This provision is included to ensure that the group is using the revolving credit facility as a working capital facility rather than a term loan (this has regulatory capital as well as commercial implications). The group may only need to clean down to a net position, ie available cash in the business will be netted-off against the outstanding revolving loans.

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Overdrafts, term loans and revolving credit facilities

Overdrafts, term loans and revolving credit facilities This Practice Note explains the features of three common types of loan facility: • overdrafts • term loans, and • revolving credit facilities (RCFs) It also considers the advantages and disadvantages of each type of loan facility from a borrower's perspective. What is an overdraft? An overdraft is the most common form of bank lending and is used to help solve short-term, day-to-day cash flow issues. As such, an overdraft facility is sometimes referred to as a 'working capital facility'. An overdraft is a loan—it enables the borrower to borrow on a designated account up to a specified amount. An overdraft can be 'planned' or 'authorised' (ie expressly agreed) or 'unplanned' or 'unauthorised' (ie arise from an implied request for an overdraft arising from the borrower giving a payment instruction that would take it beyond its agreed overdraft limit (if any)). The lender does not have to let the borrower become overdrawn. The key features of an...

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