2 min read
Definition
A cleardown is a requirement that a business bring a revolving facility or overdraft back to zero for a short period each year, proving the borrowing is genuinely short-term working capital rather than a permanent, disguised term loan.
In plain terms
A lender may require the account to sit in credit for, say, 30 days a year. Failing a cleardown suggests the facility has become structural — a sign the business may need permanent funding instead of a revolving one.
Why it matters
The cleardown test is a check on how you are using short-term finance. See revolving credit facility and overdraft limit.
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