Glossary · operations

Zero Balance Account ZBA

Also called ZBA, zero-balance account, sweep account structure.

A subsidiary bank account automatically funded from, or swept into, a master concentration account each day, so it ends every day at zero.

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What it means

A treasury structure, not a product. One master account holds the cash; the subsidiary accounts exist to segregate activity.

Disbursement ZBAs.A payroll account or an accounts payable account sits empty. When items present, the bank funds them from the master to the exact penny.
Collection ZBAs.Deposits into a location or division account are swept up into the master at end of day.

The point is control and visibility: each account shows a clean record of one activity, no balance sits idle in the wrong place, and exposure to a compromised account number is limited to the day's items.

Where it meets financing

Cash dominion in ABL and factoring.Collections land in a lockbox or blocked account and sweep to the lender daily, applying against the loan. You then re-borrow to fund operations. The sweep is the lender's, on the lender's schedule.
Deposit account control agreements.A DACA gives the lender control over a specified account. Combined with a sweep, cash moves out of your reach automatically.
Bank-statement underwriting.This is where a legitimate structure creates a problem, because a funder reading one account sees something that looks like distress.

Where this one catches people

If you run a sweep structure and apply for deposit-based funding, supply the whole structure — master and subsidiaries — with a one-paragraph explanation, on day one. An underwriter handed a single swept account sees daily zero balances, no cushion, and large outbound transfers to an account they cannot see. Every one of those reads as a business in trouble or as money being moved, and the offer is priced accordingly if it comes at all.

The second issue is operational and it catches businesses that are not in trouble at all. An ACH debit presented against a subsidiary account that is not funded that day will return. Under an advance or loan agreement, a returned debit is typically an event of default in its own right, entirely regardless of how much money is sitting in the master account an hour later. If you take a facility with fixed debits, either point the debits at the funded master account or make certain the funding instruction covers them before the presentment cut-off.

Where you will meet this term

Merchant Cash Advance Working Capital Invoice Financing Asset-Based Lending

Read next

ACH debitA pull of funds from your account initiated by the funder under the authorization you signed, and the collect… Average daily balance (ADB)The mean end-of-day balance in the operating account over a period, used as the main test of whether a busine… Bank statement underwritingMaking a funding decision primarily from three to twelve months of business bank statements rather than from … Cutoff timeThe daily deadline for submitting a payment or funding instruction, after which it is processed on the next b… Deposit account control agreement (DACA)A three-party agreement among a borrower, its lender and its bank that gives the lender control of a deposit … LockboxA bank account controlled by the lender into which customer payments are directed, so collections reach the l… NSF fee (NSF)A charge applied when a scheduled debit is returned unpaid, usually levied twice for the same event - once by… Negative daysDays within a statement period on which the operating account closed with a negative balance, counted per mon… SweepAutomatic movement of collected funds from a designated account to the lender, applied against the outstandin… True RevenueWhat an underwriter concludes you actually sold, after stripping transfers, funding proceeds, refunds, redepo…

Zero Balance Account — common questions

What does zero balance account mean?

A subsidiary bank account automatically funded from, or swept into, a master concentration account each day, so it ends every day at zero.

Where does zero balance account catch people out?

If you run a sweep structure and apply for deposit-based funding, supply the whole structure — master and subsidiaries — with a one-paragraph explanation, on day one. An underwriter handed a single swept account sees daily zero balances, no cushion, and large outbound transfers to an account they cannot see. Every one of those reads as a business in trouble or as money being moved, and the offer is priced accordingly if it comes at all.

Is zero balance account the same as an interest rate?

Zero Balance Account 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 zero balance account apply to?

Merchant Cash Advance, Working Capital, Invoice Financing, Asset-Based Lending.

Is there a worked example of zero balance account?

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 zero balance account?

ACH debit, Average daily balance, Bank statement underwriting, Cutoff time, Deposit account control agreement.

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.