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How business sweep accounts work

Managing cash position is a day-to-day responsibility for every small-business owner. However, it’s also a time-intensive task that can complicate daily business operations, especially when there are other pressing matters that must be addressed.

Blog illustration: Sweep Accounts can be created In one dayBank Midwest understands the strain small business owners can face in managing their cash. That’s why we have a number of tools and services to make the job easier, including sweep accounts. The less effort you spend on moving money between accounts, the more time and attention you have for other issues or opportunities.

One way business owners can make their financial lives simpler is by opening a sweep account. These accounts can streamline many cash management workflows — and, best of all, they can put money to work by earning interest or giving your company some other advantage.

Interested in learning more about the specifics of sweep accounts, how they work and what benefits they have for businesses? Let’s take a closer look.

What is a sweep account?

Typically, a sweep account is an interest-earning, investment or money market account that is linked to a traditional business checking account.

It works like this: Business owners determine a minimum balance for their primary commercial checking account. Any excess funds held in that account at the end of the business day are then transferred into the sweep account, where they collect interest. Conversely, if the checking account balance is below that level at the close of business, the sweep account transfers funds back into the operating account to ensure the minimum is met.

What are the benefits of sweep accounts?

For most business owners, the topline benefit of maintaining a sweep account is that their money is being put to work. Instead of allowing cash to idle aimlessly in a checking account, businesses can put those funds in an interest-bearing sweep account that generates returns for them.

The advantages of automation must also be mentioned. Business owners have more than enough on their daily to-do lists without having to also busy themselves with transferring marginal amounts between accounts at the end of the day. However, those dollars and cents can be making a difference. A sweep account makes everything easier by simplifying and streamlining the transfer process, so that all owners really need to do is set up a minimum limit. Automation enables businesses to reap returns on short-term investments that would otherwise be too time-intensive for them to realize under normal operating circumstances.

Also, the benefits a business enjoys depends on the type of sweep account utilized:

  • Traditional sweep account: The most popular and commonly offered form of sweep account is the one described above, which transfers money to and from your operating account into a higher yield account.
  • Insured cash sweep (ICS): FDIC protection is normally available for up to $250,000 in deposits per account. However, ICS allows businesses to potentially access protection on millions by leveraging an interconnected network of banks offering matching deposits for purposes of sweeps.
  • Credit line sweep: Instead of transferring funds to an interest account, this type of sweep uses excess funds to pay down credit balances with your financial provider, while also automatically covering operating shortfalls with credit draws.
  • Payroll sweep: Payroll can be a headache sometimes, but not with this type of sweep account. Instead of you manually moving payroll funds, the account handles everything by transferring from operating to payroll, eliminating time crunches and oversight mistakes.

What businesses benefit from a sweep account?

There really isn’t a limit on what type of businesses can benefit from a sweep account. Just about every type of commercial organization can realize the benefits of automation in capital planning. Even entrepreneurs can take advantage of sweep accounts without a traditional business account, as Bank Midwest also offers sweep accounts for personal banking.

Are business sweep accounts commonly used?

Perhaps the biggest obstacle to widespread sweep account adoption is the misconception that these accounts are difficult to set up.

At Bank Midwest, business owners can set up a sweep account in a single day. All it takes is a conversation with your banker on what your account minimum limit will be and what increments you wish to use with cash transfers. Setting up a sweep account is so deceptively simple that many who are just becoming familiar with the concept may think it couldn’t possibly be so straightforward — and thus might avoid opening a sweep account, to their detriment.

There’s very little involvement required of a business owner when managing a sweep account. An annual review of minimum limits is best practice, but owners can rest assured that everything is being taken care of behind the scenes, allowing them to focus their time and attention on the issues facing their business.

Some owners might have concerns regarding liquidity. However, sweep accounts often offer same-day access to funds. They also improve liquidity by, in essence, creating a reserve account that can be used to buttress a primary operating account.

Contact Bank Midwest about opening a sweep account

With a sweep account from Bank Midwest, you set the rules and go.

A sweep account gives you the best of both worlds: operational efficiency plus the opportunity for short-term yields that you don’t have to exhaust yourself to find.

Interest is paid according to daily balance levels and credited after each statement cycle. We’ll send email confirmations in addition to your combined monthly statements. The higher your account balance, the more interest you stand to earn. Or, you could take advantage of other types of sweep accounts offered by Bank Midwest, like ICS or payroll sweep.

Want to get started on the simple process of opening a sweep account? Contact us today to start seeing the benefits as soon as possible.



Sweeps accounts are only one piece of managing business finances.  Download our eBook on the basics of treasury management which summarizes additional services available including making ACH payments and payroll to receiving online customer payments and more.

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