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Float
Also called clearance days, float days, settlement lag.
The gap between when money moves and when it counts as received, and in factoring, the extra days a contract adds before a customer's payment is treated as arriving.
Drafted with AI assistance. Not yet independently checked. Nobody has verified the claims on this page against a source, so treat the figures and legal points as a starting point rather than as settled, and confirm anything you are about to act on. How we check things.
What it means
Banking float
The lag between initiation and settlement. Standard ACH settles the next business day; same-day ACH has cutoffs; wires move within the day. It is why a Friday debit can post Monday and why a payoff sent at 4 p.m. does not stop the next morning's pull.
Clearance days in factoring
A stated number of days added to the date a customer's payment is received before it is applied to your account. During those days the discount fee continues to run and, on prime-plus structures, so does interest. The provision is usually in the definitions section rather than in pricing, described as float days, clearance days, or a collection date convention.
Card processing
The delay between a batch closing and funds arriving, which for a business collecting under a percentage holdback affects when the funder's share is taken.
Where this one catches people
Clearance days are a genuine cost hidden in a clause that mentions no money. Three added days on every invoice, on a ledger paying at 30, is a tenth more time being charged for on every dollar factored, and it never appears in the rate comparison. Ask for the clearance day convention in writing and include it when you model the cost.
Worked through
An invoice under a fee charged per 30 days, paid by the customer on day 29, looks like a single period. Add three clearance days and it is treated as received on day 32, crosses the boundary, and is charged for two periods. The fee on that invoice doubles without the customer paying a day later.
Figures in the example are illustrative. They show the arithmetic, not a quote — what any one lender would charge is on that lender's page, where it is published at all.
Where you will meet this term
Read next
Float — common questions
What does float mean?
The gap between when money moves and when it counts as received, and in factoring, the extra days a contract adds before a customer's payment is treated as arriving.
Where does float catch people out?
Clearance days are a genuine cost hidden in a clause that mentions no money. Three added days on every invoice, on a ledger paying at 30, is a tenth more time being charged for on every dollar factored, and it never appears in the rate comparison. Ask for the clearance day convention in writing and include it when you model the cost.
Is float the same as an interest rate?
Float is defined above; if you are comparing it against a rate, check whether the two measures share a time dimension before you put them side by side.
Which products does float apply to?
Merchant Cash Advance, Invoice Financing, Credit Card Processing.
Is there a worked example of float?
Yes, on this page, and it is labelled illustrative. It shows the arithmetic, not a quote from any lender.
What else should I read alongside float?
ACH, Days sales outstanding, Discount rate, Factoring commission, Lockbox.
Has this definition been checked?
Not yet. This entry is drafted and live, and the notice at the top says so. Confirm anything you are about to act on.
Is this legal advice?
No. It is a definition. What a clause does in your contract, in your state, is a question for a lawyer licensed where you are.
Can I suggest a term?
Yes — [email protected]. The glossary grows from what people are actually shown in contracts.