In one sentence
A mechanism directing excess property cash flow to the lender, for paydown or reserves, when a performance trigger is breached.
The longer version
A cash sweep traps cash that would otherwise go to the borrower once a metric like DSCR falls below a threshold. It protects the lender by redirecting cash flow before a problem deepens.
Sweeps live inside the cash management structure and are tested from financial reporting, tying together servicing, covenants, and the controlled accounts.
Common questions
- What is a cash sweep?
- A mechanism that directs a property's excess cash flow to the lender, for principal paydown or a reserve, once a performance trigger is breached.
- What triggers a cash sweep?
- Common triggers include DSCR or debt yield falling below a threshold, a major tenant vacating or going dark, or a loan entering its final period before maturity.
- How does a cash sweep end?
- Usually when the triggering condition is cured and stays cured for a set number of periods, such as two consecutive quarters above the coverage threshold.
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