Debt and cash Updated November 2026

Cash sweep

A cash sweep uses the cash left after interest, taxes, capex and scheduled amortization to repay debt early. Optional repayment = MIN(cash available for the sweep × sweep percentage, opening balance - mandatory repayment), so the model never repays more than is outstanding. It is the main driver of debt paydown, and so of equity returns, in an LBO.

Syntax

Sweep = MIN(MAX(cash available × sweep %, 0), opening debt - mandatory repayment)

Part	What it is
`cash available`	Opening cash + levered free cash flow - mandatory repayment - minimum cash
`sweep %`	Share of excess cash that must go to the lenders, set by the credit agreement; models often assume 100 percent
`opening debt`	Term loan balance at the start of the period
`mandatory repayment`	Scheduled amortization, for example 1 percent a year on a term loan B

Examples

Opening term loan 400, mandatory amortization 1% = 4, levered free cash flow 60, opening cash 50, minimum cash 50, sweep 100%
Cash available = 50 + 60 - 4 - 50 = 56
=MIN(MAX(56 * 100%, 0), 400 - 4)

Result: Sweep 56; closing debt 400 - 4 - 56 = 340; closing cash 50

The same year with a 50% sweep
=MIN(MAX(56 * 50%, 0), 396)

Result: Sweep 28; closing debt 368; closing cash 50 + 60 - 4 - 28 = 78

Final year: opening debt 30, mandatory 4, cash available 90
=MIN(MAX(90, 0), 30 - 4)

Result: 26, the loan is fully repaid; the remaining 64 stays in cash

Without the MIN, the formula would repay 90 and show a negative loan balance.

Common mistakes

Sweeping before the mandatory amortization and the minimum cash are taken out, which overstates the repayment and pushes cash below the minimum.
Computing interest on the closing balance, so the sweep depends on interest and interest depends on the sweep; use the opening balance, or the average balance with an iteration switch.
Letting the sweep exceed the opening balance in the last year; the MIN against the remaining balance keeps the debt from going negative.
Applying the sweep to every tranche at once; a credit agreement sends excess cash to the most senior tranche first, then to the next, in a waterfall.

Practice Cash sweep

These drills check your answer on live data, free, no account needed.

Term loan with a cash sweepA term loan has a fixed scheduled repayment (B3) plus a cash sweep: the share in B2 of any cash left after the scheduled repayment goes to repay the loan early. Fill the opening balance for later years (row 6), the scheduled repayment (row 8: the smaller of B3 and the opening balance), cash after the scheduled repayment (row 9), the sweep (row 10: the share of the positive cash left, but never more than what remains of the loan) and the closing balance (row 11).
Debt service coverage testLenders compare cash available for debt service with interest plus principal. Fill the coverage ratio (row 8) and a covenant test (row 9) that shows "Pass" when the ratio is at least the minimum in B2 and "Breach" otherwise.
Cash roll-forwardRoll cash forward. Outflows are already negative. Closing cash (row 10) is opening cash plus all the flows in rows 6 to 9. Each later year opens with the prior closing cash.

Questions

What is a typical cash sweep percentage?

Credit agreements often start at 50 percent of excess cash flow and step down to 25 or 0 percent as leverage falls. LBO models commonly assume 100 percent to show the fastest paydown, with the percentage as an input so it can be changed.

Is a cash sweep the same as mandatory repayment?

No. Mandatory amortization is scheduled by the loan terms; the sweep is the optional repayment on top of it from excess cash flow. Keep them on separate rows so the debt schedule shows each.

How does the cash sweep affect IRR?

Every dollar swept lowers net debt at exit by a dollar, so it goes straight to the sponsor's equity value. In a deal with no EBITDA growth and no multiple expansion, debt paydown is the only source of return.

Debt scheduleA debt schedule rolls each loan forward: closing = opening + draws - repayments, with interest on the opening balance. Layout, example, amortization, sweeps.
RevolverA revolver draws when cash falls below the minimum and repays from excess cash. The MIN and MAX formula, a two-year worked example and avoiding circularity.
DSCRDSCR = cash flow available for debt service / (interest + principal). How lenders compute it, exact examples, typical covenant levels and sizing debt from it.
Sources and usesThe LBO sources and uses table: purchase price, refinanced debt and fees as uses; new debt, rollover and the sponsor equity plug as sources. Worked example.