Annual Clean-Up


DEFINITION of 'Annual Clean-Up'

A banking practice that requires a borrower to pay off all balances of any renewable lines of credit and keep them at zero for 30 to 60 days or so. Although the annual clean up is a long-time tradition, it's becoming less common nowadays. Clean-ups aren't usually required on secured credit lines.

Also known as the clean-up requirement.

BREAKING DOWN 'Annual Clean-Up'

The annual clean up usually takes place when the customer is flush with cash. For instance, after a peak sales period when receivables have mostly been collected and cash needs for replenishing inventory are low. The clean-up shows that credit lines are being used only during periods of peak cash requirements and are not needed for the normal financing of the business.

  1. Secured Debt

    Debt backed or secured by collateral to reduce the risk associated ...
  2. Inventory

    The raw materials, work-in-process goods and completely finished ...
  3. Accounts Receivable - AR

    Money owed by customers (individuals or corporations) to another ...
  4. Unsecured Loan

    A loan that is issued and supported only by the borrower's creditworthiness, ...
  5. Line Of Credit - LOC

    An arrangement between a financial institution, usually a bank, ...
  6. Readvanceable Mortgage

    A mortgage feature that allows the borrower to re-borrow the ...
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