Treasury Bills (T-Bills): A Complete Guide for Business Cash Management

Between service bills, bills of exchange, and good old-fashioned greenbacks, the world of finance has quite a few different types of bills. Almost 100 years ago, the United States created another type: the Treasury bill (T-bill). These are short-term instruments that can use idle cash to earn interest while preserving the easy accessibility that businesses need.

T-bills are one of the simplest fixed-income instruments available, and one of the most trusted. However, understanding how they earn a return and how they compare to other short-term options is important before incorporating them into your cash management strategy. This article covers what T-bills are, how they work, how returns are calculated, and when they make sense for businesses.

We'll also look at Slash, a business banking platform with a treasury account that can earn up to 3.76% annualized yield through money market funds managed by BlackRock and Morgan Stanley.¹,⁶ Treasury sits in the same dashboard as your checking account, corporate cards, and accounting integrations, with same-day to next-day liquidity so your business can earn a market yield without isolating cash from the rest of your finances.

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What Are Treasury Bills?

Treasury bills are short-term debt securities issued by the United States Department of the Treasury. They are the shortest-duration instruments in the Treasury's product lineup, with maturities ranging from 4 weeks to 52 weeks. When the federal government needs to borrow money to fund its operations, it issues T-bills through a competitive auction process, and investors purchase them as a way to lend to the government for a defined period.

T-bills are backed by the full faith and credit of the U.S. government, which makes them one of the safest financial instruments available. The U.S. has never defaulted on its debt obligations, which is why T-bills are treated as essentially risk-free with respect to principal repayment. Each bill carries a $100 minimum investment, with purchases available in $100 increments. That accessibility makes them appropriate for individual investors, small businesses, and large institutions alike.

Alongside T-bills, the government also issues Treasury notes and bonds. Notes mature in 2 to 10 years, while bonds mature in 20 to 30 years. Both pay semi-annual coupon interest, which is the rate paid from the issuer to the holder.

A few key features define how T-bills work:

Zero-coupon structure: T-bills pay no periodic interest. The entire return is realized when the bill is redeemed at face value.
Discount pricing: T-bills are issued and traded at a price below their face value. A 26-week T-bill might be purchased for $981.50 with a $1,000 face value, and the $18.50 difference is the return.
Guaranteed principal return: At maturity, the U.S. Treasury redeems T-bills at full face value regardless of what happens to interest rates in the interim.
State and local tax exemption: Interest income from Treasury securities is exempt from state and local income taxes, though it remains subject to federal income tax. For businesses in high-tax states, this can make T-bills more attractive than fully taxable alternatives like CDs or savings accounts.

How T-Bills Are Issued and Purchased

The U.S. Treasury sells T-bills through regular auctions conducted by the Bureau of the Fiscal Service, with the Federal Reserve acting as fiscal agent. Most auctions take place through TreasuryDirect.gov. 4- and 8-week bills are auctioned weekly on Thursdays, 13- and 26-week bills are auctioned weekly on Mondays, and 52-week bills are auctioned every four weeks.

Buyers can submit two types of bids:

Non-competitive bids mean the investor agrees to accept whatever rate is determined at auction, with their order guaranteed to be filled (up to a $10 million limit per auction). This is the standard approach for individual and small business investors who prioritize certainty of purchase over rate negotiation.
Competitive bids let the investor specify the discount rate they're willing to accept. If the auction clears at or below the investor's bid rate, the bid is filled at the clearing rate. If it clears above the bid rate, the bid is rejected. All winning bidders, competitive and non-competitive, receive the same rate from a given auction. Competitive bids are typically used by institutional investors with specific yield targets.

When any bill reaches maturity, the face value is automatically credited to the investor's account.

Other ways to purchase T-bills

If you'd rather not participate in TreasuryDirect auctions directly, there are a few alternatives:

Secondary market trading: T-bills can be bought and sold through broker-dealers in the secondary market. Recently auctioned bills (called "on-the-run") are generally the most liquid. Secondary market purchases let businesses buy bills with specific maturity dates rather than waiting for the next auction.
Broker and bank purchases: Brokerage accounts like Fidelity and some bank platforms allow direct T-bill purchases. Some charge a small transaction fee, while others offer commission-free Treasury purchases.
Treasury platforms: For most businesses, directly managing T-bill purchases adds operational overhead that finance teams may prefer to avoid. Platforms like Slash provide exposure to short-term Treasury yields through managed money market funds, eliminating the manual work while delivering comparable returns.

How Treasury Bills Generate a Return

T-bills don't pay interest in the traditional sense. Instead, they generate a return through the difference between the purchase price (below par) and the redemption value (par). A $1,000 face value 26-week T-bill purchased for $981.50 returns $1,000 at maturity, with the $18.50 gain serving as the investor's return.

The Treasury states T-bill rates as a discount rate, calculated on the face value over a 360-day year. The investor's actual return, though, is calculated on the purchase price over a 365-day year. This is why the effective annualized yield ends up slightly higher than the stated discount rate. For a $10,000 26-week T-bill at a 3.60% discount rate, the purchase price works out to $9,818, the dollar return is $182, and the effective annualized yield is closer to 3.72%.

A few factors influence the final yield:

Maturity: Longer-dated bills typically offer higher yields than shorter ones, reflecting the additional term risk.
Market conditions: T-bill yields move with the broader rate environment, particularly the federal funds rate set by the Federal Reserve.
Demand at auction: When demand is high, yields drop. When demand is weaker, yields rise to attract buyers.

T-bill yields have ranged widely over time, from near zero during low-rate policy periods to over 15% in the early 1980s. Recent yields in the 3.5–4% range are roughly in line with where short-term Treasury rates have sat through much of the post-pandemic period, though the exact level shifts with Fed policy.

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Pros and Cons of Investing in Treasury Bills for SMBs

T-bills come with real advantages but also some trade-offs worth understanding.

T-Bill Benefits

Safety and government backing: T-bills carry virtually no credit risk, as the U.S. Treasury has never failed to repay at par.
State and local tax exemption: Interest is exempt from state and local taxes, improving after-tax yield relative to bank deposits in high-tax jurisdictions.
Liquidity and marketability: T-bills trade actively in the secondary market with tight bid-ask spreads, particularly for on-the-run issues. They can be sold before maturity without the penalties that apply to CDs.
Predictable returns: Your return is fixed at purchase. Unlike money market funds that float with daily rate changes, a T-bill purchased at a specific yield delivers that yield if held to maturity.
Low minimum investment: With a $100 minimum, T-bills are accessible to businesses of all sizes.
Portfolio anchor: As one of the safest short-duration assets available, T-bills can serve as a low-risk foundation for a broader cash management strategy.

T-Bill Drawbacks

Interest rate risk for early sellers: If a business needs to sell a T-bill before maturity and rates have risen, the bill's market price will have fallen, which can mean a lower return or a loss.
Inflation risk: If inflation runs above the T-bill yield, the real return on the investment is negative.
Opportunity cost: T-bills yield less than many options with credit risk. Businesses comfortable with more risk can typically find higher yields elsewhere.
Lower yields vs. longer maturities: The yield curve typically slopes upward, meaning longer-dated instruments yield more. Businesses that can commit capital for longer horizons leave some yield on the table by sticking with T-bills.

When Businesses Should Consider T-Bills

T-bills tend to make the most sense in a few specific situations, usually tied to how much excess cash a business is sitting on, how predictable upcoming spending is, and what kind of tax exposure the business has. The scenarios below are where T-bills tend to earn their place in a business's cash management strategy:

Excess operating cash: When cash balances exceed near-term payroll, vendor, and tax obligations, the surplus can be deployed into T-bills rather than sitting in a non-yielding checking account. Even a 4-week T-bill on excess cash can generate meaningful return over a year.
Short-term liquidity needs with known dates. When a business knows it will need a specific amount of cash on a specific future date (an equipment purchase, a quarterly tax payment, a planned hire), buying a T-bill that matures right before the spending date lets the cash earn yield in the meantime without risking timing mismatches.
Tax planning in high-tax states. For businesses operating in states with high income tax rates, the state and local tax exemption on T-bill interest can improve the after-tax yield compared to fully taxable alternatives like CDs or savings accounts. The exact benefit depends on the business's tax situation, so it's worth running the numbers with a tax professional.
Building a low-risk core for a broader cash strategy. Businesses that want to start earning yield without taking on credit risk often use T-bills as the foundation of a treasury approach, then layer in higher-yielding instruments like corporate paper or longer-duration notes once they're comfortable with the framework.
Bridging between funding events. Startups holding the proceeds of a recent fundraise often have a clear runway window before they'll need additional capital. T-bills with maturities aligned to that window let the cash earn a return without exposing it to longer-duration market risk.

Once you've decided where T-bills fit, it's worth comparing them directly against the other common places businesses park short-term cash:

	T-bills	CDs	Money Market Accounts	Corporate Bonds	High Yield Savings
Safety	Backed by U.S. government	FDIC up to $250K	FDIC up to $250K	Credit risk of issuer	FDIC up to $250K
Typical Yield	Tracks current T-bill rate	Varies by term and bank	Varies by bank	Higher than Treasuries, varies by issuer	Varies by bank
Liquidity	Secondary market, no penalty	Early withdrawal penalties	Often capped at 6 withdrawals/month	Secondary market, with price risk	Generally high
Tax Treatment	Federal only	Federal, state, local	Federal, state, local	Federal, state, local	Federal, state, local
Minimum Investment	$100	Varies ($500–$1,000+)	Often $0–$2,500	$1,000+ (typically)	Often $0
Duration	4-52 weeks	3 months–5 years	None (demand deposit)	1-30 years	None

Put Your Idle Cash to Work with Slash Treasury

T-bills are safe, liquid, and capable of generating useful return on idle cash. The downside is operational: managing auctions through TreasuryDirect, rolling maturities, and maintaining a separate brokerage account take time that founders and finance leads usually don't have.

Slash Treasury offers up to 3.77% annualized yield through a treasury account that lives directly within the Slash business banking platform. Slash invests through two funds: BlackRock's TSTXX, which holds cash, U.S. Treasury bills and notes, and Treasury-backed repurchase agreements, and Morgan Stanley's MULSX, an ultra-short income portfolio holding high-quality commercial paper, corporate debt, and other money market instruments. Rather than managing auctions and rolling maturities, Slash users select how much of their idle cash to allocate to each fund based on their preferences.

Treasury also sits alongside the rest of the Slash platform, including FDIC-insured business checking², corporate cards earning up to 2% cashback, invoicing, bill pay, and native crypto rails, with multi-entity support for businesses running more than one company. A few of the features Slash users can take advantage of:

Accounting & ERP integrations: Sync transaction data with QuickBooks Online, Xero, NetSuite, or Sage Intacct to streamline reconciliation, reporting, and month-end close.
AI-powered finance: Twin, Slash's built-in AI agent, can be prompted with natural language to complete complex tasks like creating cards, paying invoices, and reviewing cash flow.
Slash Visa® Platinum Card: Set customizable spending controls and issue unlimited virtual cards for team expenses, vendor payments, and subscriptions. Earn up to 2% cashback on business purchases.
Native cryptocurrency support: Send and receive USDC and USDT across eight supported blockchains for global payments that can be faster and lower-cost than traditional rails.⁴
Diverse payment methods: Card spend, global ACH, international wires to 180+ countries via SWIFT, and real-time domestic payments through RTP and FedNow.

For businesses looking to optimize idle cash without taking on the operational overhead of direct T-bill management, Slash Treasury offers the yield profile of short-term government securities through a unified banking platform.

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Frequently Asked Questions

Are Treasury bills safe?

T-bills are considered one of the safest financial instruments available in the U.S. market. They are backed by the full faith and credit of the United States government, which has never defaulted on its debt obligations.

What's the minimum investment for Treasury bills?

The minimum investment in a Treasury bill through TreasuryDirect is $100, with all purchases made in $100 increments. Money market funds and treasury accounts that hold T-bills may have different minimums; Slash Treasury, for example, has no minimum balance requirement.

How are Treasury bills different from bonds?

The primary differences are maturity, return structure, and risk profile. T-bills mature in one year or less, while Treasury bonds mature in 20 or 30 years. T-bills pay no coupon interest, with the entire return coming from the discount-to-par pricing. Bonds pay semi-annual coupon interest throughout their life.