excess cash flow

excess cash flow
Refers to a financial measurement used in the loan agreement which activates the requirement for mandatory prepayments of the loan. Excess cash flow generally reflects the amount of money or cash flow a company generates from operations after it has paid dividends and taken care of essentials like plant and equipment maintenance and other capital expenditures. If the financial results of the borrower indicate that it has excess cash flow, then the loan agreement typically requires 50−75% of that excess cash flow amount to be used as a prepayment of the outstanding loans of the borrower under the loan agreement.

Practical Law Dictionary. Glossary of UK, US and international legal terms. . 2010.

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