What is Float in Finance?

Float is the interval between when a check is written and when it clears the bank account on which it was drawn. Activities included in float, and which can extend its duration, are:

The time required for the payer to send a check to the payee
The time required for the payee to present the check to its bank for payment
The time required for the payee’s bank to present the check to the payer’s bank
The time required for the payer’s bank to transfer the funds to the payee’s bank

Electronic payments greatly compress the amount of float time, usually to just one or two days.

Stock Float

Float can refer to the number of shares of a company’s stock that are available for trading. This amount is calculated as the total number of shares outstanding, minus closely held shares. For a closely-held business, the stock float may be quite small; this can be a problem for outside investors, who may find that there is a limited market for the purchase or sale of a company’s shares. In many cases, a small stock float will turn away large investors, such as institutional investors.