Legal Definitions - clearing loan

A clearing loan is a type of loan made to a bond dealer while they wait to sell a bond issue. It is a temporary loan that helps the dealer manage their cash flow until they can sell the bonds and pay back the loan.

For example, if a bond dealer needs to raise money quickly to buy a new bond issue, they may take out a clearing loan from a bank. The bank will lend them the money they need, and the dealer will use the proceeds from the bond sale to pay back the loan.

Clearing loans are a common practice in the bond market and help dealers manage their finances more efficiently.