What is Availability Float?

Availability float is the time between when a check is deposited and when the funds are available to the recipient. The cause of the delay is the time required for the issuing bank to honor the check and transfer funds to the receiving bank. In effect, it is a processing delay. The availability float works in favor of the payer, which retains use of its funds during the float period. This float works against the interests of the payee, which will not have use of the funds until the funds are made available to it by the bank.

How to Reduce Availability Float

The duration of availability float can be reduced by using electronic payments. Wire transfers have same-day availability, while ACH payments have 1-2 day availability. Also, when a check payment involves accounts held within the same bank, the funds are typically transferred between the accounts as soon as the bank receives the check. In both cases, the absence of physical check processing reduces the need for a float period.

It is also possible for a customer that does a large amount of business with a bank to negotiate a slightly shorter availability float with the bank.

Example of Availability Float

As an example of availability float, a business currently has a balance in its bank account of $42,000. The entity receives a check for $3,000 from a customer, deposits the check, and records the cash receipt in its own records, resulting in a cash balance of $45,000. The bank's records will still show a $42,000 balance for several more days, until the check clears. This $3,000 difference is the availability float.