If you’re a business owner, you know the importance of making your money work harder for you. You also probably understand how interest payments can really add up when you need to borrow money. By setting up a line of credit sweep, you can use idle cash to automatically pay down your line of credit to save on interest charges.
What Is a Line of Credit Sweep Service?
If your business has idle funds available, a line of credit sweep service will automatically use some of your excess funds in your checking account to pay down your short-term borrowings (i.e. line of credit). The sweep also works in reverse. If funds are below a set target balance in your checking account, then money will be transferred from your Line of Credit to cover daily transactions and help you avoid overdraft fees. To set up this type of service, you simply need to meet with your business banking advisor. They will be able to determine if this will best suit your needs and implement the sweep service to help lower your interest costs.
What Are the Benefits of Using a Sweep Service?
While a line of credit provides important access to short term borrowing, the immediate availability of funds usually comes with a higher interest rate than traditional loans. Rather than letting your checking account accumulate an overabundance of funds (that aren’t working in your favor), let those funds work harder for you by reducing interest expense that holds the potential to accumulate over time.
Line of credit sweep services operate automatically, so you don’t have to constantly monitor your idle cash. This service responds to changes in your account daily to ensure that you’re always getting the most out of your money, without overdrafting. Sweep services also improve cash flow for your business by keeping your money moving in ways that make sense.
By minimizing your interest expenses, you can enjoy all the benefits of your line of credit without paying unnecessary interest charges.
How to Determine If a Line of Credit Sweep Service Is Right for You
The two most important things you need in order to qualify for a line of credit sweep service are:
- A checking account
- A line of credit
You’ll need to make sure that your checking account and your line of credit are set up through the same bank so that the transfer process is smooth and easy. The next qualification you need to implement a line of credit sweep is to choose a minimum daily balance for your checking account so that excess funds are available to sweep to your line of credit.
Reach out to Our Banking Team Today
Contact Union Community Bank to find out how you can be using your cash more effectively. A Line of credit sweep might be a great option for you!