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Cutoff time
Also called cut-off, funding cutoff, ACH cutoff, wire cutoff.
The daily deadline for submitting a payment or funding instruction, after which it is processed on the next banking day.
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What it means
Several cutoffs stack on top of each other and they are not the same time. The funder has an internal deadline for approving and releasing a funding. Its bank has a deadline for accepting ACH files and wire instructions, which is earlier than the network's. The ACH network has its own submission windows, with same-day ACH running through a small number of daily windows and standard entries settling the following banking day. Wires clear same-day but only within the Fedwire operating hours, and third-party transfer deadlines close before the system does.
The consequence for a business waiting on money is that same-day funding means same-day if the file clears every cutoff in the chain. One missing document at four in the afternoon Eastern moves the wire to tomorrow, and if tomorrow is a Saturday, to Monday.
On the payment side, cutoffs determine when a debit hits. A payment submitted after cutoff on Friday settles Monday, and a payment submitted the following Monday settles Tuesday, so two debits can land within a day of each other.
Time zones are the routine trap for west coast businesses. Cutoffs are usually stated in Eastern time by funders headquartered in New York and New Jersey, so a two o'clock deadline is eleven in the morning in California.
Where this one catches people
Merchants assume a payoff or a funding will be processed on the day it is agreed. Wiring a payoff after the recipient bank's cutoff means the funds are credited the next banking day, which can push the payoff past the expiry of the payoff letter and past another day's debit. When a payoff figure is good until a date, ask what time on that date and confirm the wire cutoff at both ends.
Where you will meet this term
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Cutoff time — common questions
What does cutoff time mean?
The daily deadline for submitting a payment or funding instruction, after which it is processed on the next banking day.
Where does cutoff time catch people out?
Merchants assume a payoff or a funding will be processed on the day it is agreed. Wiring a payoff after the recipient bank's cutoff means the funds are credited the next banking day, which can push the payoff past the expiry of the payoff letter and past another day's debit. When a payoff figure is good until a date, ask what time on that date and confirm the wire cutoff at both ends.
Is cutoff time the same as an interest rate?
Cutoff time 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 cutoff time apply to?
Merchant Cash Advance, Working Capital, Term Loan, Business Line of Credit, Invoice Financing.
Is there a worked example of cutoff time?
Not on this entry. Where a term is arithmetic, the arithmetic is shown; this one is not primarily a calculation.
What else should I read alongside cutoff time?
ACH, ACH debit, Business days, Payoff letter, Same-day ACH.
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.