A credit sweep is an arrangement between a business and its bank, where the bank automatically uses all excess funds in a deposit account to reduce the firm's outstanding line of credit. The amount of cash swept out of the deposit account is based on a threshold level that the business wants to maintain in the account; all funds above this baseline amount are used to pay down the debt. The bank offering this service may also offer the reverse transaction, where cash is shifted from the line of credit into the deposit account if the balance in the account drops below the threshold level.
Credit sweeps are most useful for larger entities that have multiple bank accounts that are difficult to track manually on an ongoing basis. Using a credit sweep ensures that cash balances are maintained at minimum levels in deposit accounts, while also reducing the amount (and therefore the cost) of the line of credit.