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GLOSSARYTERMS AS A CREDIT DESK USES THEM

Clean-up period

What is a clean-up period in acquisition finance?

ONE OF 366 TERMS · FREE · NO SIGNUP

BY MICHAEL SHANG · SIXTEEN YEARS IN COMMERCIAL BANKING · UPDATED

// THE SHORT ANSWER

A clean-up period is a window after an acquisition completes, often 90 or 120 days, during which a breach of the loan's representations, undertakings or default terms that arises from the newly acquired company does not count as an event of default. It exists because the buyer could not fully check the target before owning it and needs time to fix what it finds. The protection usually applies only if the problem can be remedied within the window, is being remedied, was not caused by the buyer and would not have a material adverse effect; once the window closes, the normal terms apply.

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.

// WHAT IT IS NOT

A clean-down, which some revolving facilities call an annual clean-up, requires the balance to return to zero or a low level for a run of days each year; a clean-up period is a grace window after an acquisition.

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