Banking
Sweep Account
Quick definition
Bank arrangement that automatically transfers excess cash from a checking account into a higher-yielding investment account.
Sweep accounts move idle cash above a target balance from a low-yield operating account into a money market fund, treasury fund, or interest-bearing account daily. Modern fintechs (Mercury Treasury, Brex Cash) sweep into government-backed money funds yielding 4-5%, vs ~0% in a checking account. On $10M cash, that's $400-500K/year in additional yield essentially for free. Standard for startups with $5M+ in cash.
Related banking terms
Treasury Management
The discipline of managing a company's cash, liquidity, banking relationships, and short-term investments.
FDIC Limits ($250K)
Federal Deposit Insurance Corporation insurance covers $250K per depositor per FDIC-insured bank per ownership category.
Money Market Fund
Mutual fund holding short-term, highly liquid debt (T-bills, commercial paper, repos) targeting stable $1/share value plus yield.
Venture Debt
Debt financing for venture-backed startups, typically structured as a term loan with warrants — extends runway without immediate dilution.
Frequently asked questions
- What is Sweep Account?
- Sweep accounts move idle cash above a target balance from a low-yield operating account into a money market fund, treasury fund, or interest-bearing account daily. Modern fintechs (Mercury Treasury, Brex Cash) sweep into government-backed money funds yielding 4-5%, vs ~0% in a checking account. On $10M cash, that's $400-500K/year in additional yield essentially for free. Standard for startups with $5M+ in cash.
- Why is Sweep Account important for startups?
- Sweep Account is a banking concept that matters for startup founders because it directly affects fundraising readiness, financial decision-making, or operational discipline at the stage where mistakes are expensive to undo. Founders who understand it have a meaningfully easier time in diligence, board meetings, and investor conversations.
- What category does Sweep Account belong to?
- Sweep Account is a Banking term in the StartupCFO finance glossary — alongside other banking concepts that founders, CFOs, and accountants use in daily startup operations and reporting.
- Where can I learn more about Sweep Account?
- Beyond this definition, see the related banking terms below, or explore StartupCFO's insights and tools that put Sweep Account in context. For specific situations, talk to a fractional CFO who can walk through your numbers.
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