Scanning accounts are a typical business tool, especially for small businesses that depend on daily cash flows but want to maximize the return potential on cash reserves. A company sets a minimum balance for its main current account, through which funds are paid into a higher interest rate investment product. If the balance falls below the threshold, the funds are rejected from the investment account to the current account. There are several reasons why companies can opt for a cash-sweep. First, a cash sweep uses excess cash that would otherwise sit without reacting to a company`s account. By making daily cash-scans, a company can effectively apply its excess cash and reduce interest rates from its debt. By reducing the stock of debt, companies are also in a more favourable position to refinance their debts due to the reduction in their balance. For a company, the excess cash relates to all other cash funds after operating expenses, and regular debts have been made usable. Cash sweeps include agreements between a borrower and their bank to regularly sweep excess cash out of their accounts. As a general rule, cash sweeps occur at the end of each business day, and the excess cash is moved to a separate account and used to pay off existing debts. Therefore, cash sweep accounts should not be seen as a long-term investment solution, but as a means of earning short-term interest by investing excess cash that would otherwise be inactive into a borrower`s account. Shorter average life for borrowers: A cash sweep reduces the average life of a credit much faster than can reasonably be achieved by typical amortization conditions.

For example, a DSCR scan 1.20 times greater than 100% cash sweep creates an amortization period of 18 years. A 1.50X DSCR 100% Cash Sweep reduces amortization time to 13 years. This is important for borrowers who are more exposed to the credit challenge. It is very rare for non-troubled borrowers to accept amortization time as short as what can be obtained through cash-sweeping. Credit: While a cash sweep reduces the average term of the loan much faster than it can impose, the real benefit of cash sweeps is the period during which the credit reduction occurs.