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What tools can help me better manage my cash flow and interest expense?



Many businesses are feeling the sting of rising interest rates. Some businesses have been able to pay down debt to manage the rise in interest expense. Others need to maintain operating liquidity to meet payrolls, pay suppliers, or be prepared for unforeseen cash needs. This is a perfect time to ask your banker about what tools are available to help reduce your interest expense without sacrificing your needs for daily liquidity. 

One product that has become increasingly popular is a sweep account paired with a line of credit. On a nightly basis, the sweep moves excess cash from a business’s primary checking account to pay down their line of credit. If cash is needed in the operating account to pay bills at the end of the day, the sweep automatically draws on the line of credit and transfers funds to the checking account. Over time, this can add up to significant savings in terms of interest as well as employee time as the sweeps are initiated automatically. If, for example, a business averages $200,000 in excess cash on hand and has a line of credit priced at Prime (8.50%), then a business can save $17,000 over a course of a year simply by putting their excess cash to work.  Sweep account features and capabilities can vary, so be sure to discuss the options with your banker so that your treasury services are optimized for your business.  

Originally published in  Small Business Monthly's November  issue of 2023 by Pete Zeiser, President - Chesterfield Commercial at Midwest BankCentre.