Clean-down

BY MICHAEL SHANG · SIXTEEN YEARS IN COMMERCIAL BANKING · UPDATED 2026-11-01

// THE SHORT ANSWER

A clean-down is a covenant requiring a revolving facility's balance to return to zero, or a stated low watermark, for a continuous run of days, or by a stated date, every year — Issue 06's seasonal line must be back to zero by the last day of February. It is the bank's working-capital lie detector: a business whose cash cycle genuinely revolves passes through a natural low point annually, so the clean-down merely evidences what is already true. A facility that cannot clean down has told the bank, in data, that the need is permanent — and permanent needs are priced and structured as term debt, not carried indefinitely on a working capital line.

BASIS  Practitioner judgment from sixteen years in commercial banking, set out in How Bankers Think (Highbank Press, 2026). Every borrower on this site is a composite constructed for teaching, not a client. The market is mid-market commercial lending as practised in New Zealand and Australia; where a convention differs elsewhere, the page says so.