What is a Sweep Network and How Does it Work?

For startups managing increasingly large balances, business bank account has to do more than just store funds. It needs to offer safety, scalability, and operational simplicity, without compromising access or speed.

At Slash, a core system enabling this experience, often working silently in the background, is the sweep network.

Sweep networks play an essential role in enabling enhanced FDIC insurance for businesses holding balances well beyond the standard $250k cap. In this post, we will walk through what a sweep network is, how it works, and why it matters for startups looking to keep their capital insured while maintaining simple operations.

What Is a Sweep Network?

A sweep network is a financial system that distributes customer deposits across a wide network of FDIC-insured banks. These networks increase the total amount of FDIC coverage available to your business — without changing how you bank day to day.

When your account is connected to a sweep network, your funds are automatically allocated across multiple program banks. Each of these banks offers FDIC insurance on a portion of your deposit. This allows your business to access more total insurance coverage than you would receive by holding your funds in a single account at a single institution.

The History of FDIC

The Federal Deposit Insurance Corporation (FDIC) was created in 1933 in response to the thousands of bank failures during the Great Depression. Its establishment was a pivotal moment, designed to restore public confidence in the banking system by insuring customer deposits. Before the FDIC, bank runs were common as depositors feared losing all their money if a bank collapsed. The FDIC's creation ensured that, up to a certain limit, depositors' money would be safe, significantly stabilizing the U.S. financial system and preventing widespread panic during economic downturns.

Why Sweep Networks Exist

FDIC insurance protects up to $250,000 per depositor, per institution. That’s enough for individuals and early-stage businesses. But it quickly becomes limiting once your company starts scaling. Let’s say your business holds $10m, $1m, or even $500k. Under the standard model, anything above the first $250K is uninsured. That means your company’s capital is exposed. For most businesses, the only way to reduce that exposure is to open accounts at multiple banks and manually distribute funds across them.

There are two primary reasons why sweep networks exist:

1. To provide enhanced FDIC insurance coverage for customers.
2. To help banks manage liquidity across institutions.

On the customer side, sweep networks allow businesses to access expanded protection on their deposits without the operational burden of opening and managing multiple accounts. Rather than manually moving funds across different banks to stay within the FDIC limit at each institution, the sweep network handles this allocation automatically behind the scenes.

On the institutional side, sweep networks help balance liquidity across banks. Some banks may have more deposits than they want to hold, while others may be looking to bring in more capital. Sweep programs create flexibility in how deposits are allocated and can support broader balance sheet management across the banking ecosystem.

How It Works

When you deposit funds into your Slash account, those funds are held by our partner bank. That partner bank then routes your funds through its sweep program, which allocates them across a network of FDIC-insured institutions.

Each partner bank in the network agrees to accept a portion of the total deposit, and each portion is held below the $250,000 FDIC insurance limit. This structure means that your full balance is protected within the standard FDIC cap, just distributed across multiple institutions.

For example, if your business holds significantly more than $250,000, a sweep network enables you to receive expanded coverage without needing to manually manage 10, 20, or even 40 different bank accounts. The sweep program opens and maintains these accounts on your behalf.

This allows you to benefit from increased protection while continuing to bank through a single dashboard and interface, no added complexity or extra logins required.

What Changes for the User?

From your perspective as a business owner or operator, nothing changes. You still bank with Slash, use the same dashboard, and manage a single account.

Behind the scenes, your funds are allocated across the sweep network to provide enhanced FDIC insurance. You retain full access to your funds and can transact as usual. There are no delays or limitations in how you access your balance.

How Sweep Networks Enable Enhanced FDIC Coverage

The key benefit of sweep networks is that they enable significantly expanded FDIC insurance coverage without requiring operational work on your part.

The standard FDIC limit is $250,000 per depositor, per insured bank. If your business holds more than that at a single institution, the excess is uninsured. To stay fully protected, you would typically need to open additional bank accounts and manage the flow of funds between them.

Sweep networks solve this problem by automating the process. Your banking provider works with its sweep program and partner banks to open and maintain additional deposit accounts on your behalf. As your balance grows, it’s divided across these partner banks, each one insuring a portion of your funds.

This allows the total insured amount to grow proportionally with your balance, without adding operational overhead.

What’s the Scale of Coverage?

The total amount of coverage a sweep network can offer depends on the number of partner banks in the network and the structure of the sweep agreement.

Some banks or fintech platforms may offer enhanced insurance up to several million dollars. Others, depending on the depth of their sweep network, can offer coverage that extends far higher.

At Slash, every account is backed by a sweep network that enables FDIC insurance to scale well beyond the standard cap. This coverage is built into the account automatically. Whether you're holding six figures or scaling into eight or nine, your account infrastructure is designed to grow with you.

What Are the Benefits?

1. Scalable Protection: Sweep networks provide the ability to scale FDIC insurance coverage in proportion to your balance, without requiring any manual intervention or secondary banking relationships.
2. Operational Simplicity: Rather than opening accounts at multiple banks, you work with one provider, one interface, and one account. The sweep network handles the complexity in the background.
3. Redundancy and Resilience: Distributing funds across multiple institutions reduces reliance on any one bank. In the unlikely event that one bank experiences issues, the rest of your funds remain protected and accessible.
4. Full Access and Liquidity: Even though your deposits are spread across institutions, you maintain full access to your total balance. There’s no impact on how you send, receive, or use your funds.

Are There Risks?

The sweep network model is designed to reduce risk, not increase it.

In the event of a bank failure, FDIC insurance would apply up to the standard limit ($250k) per institution. Since your deposits are distributed across multiple partner banks, the risk of losing access to your full balance is significantly mitigated. The diversification itself adds a layer of resilience.

That said, customers may experience brief delays during FDIC resolution processes in extreme scenarios. However, the sweep network structure is intended to minimize disruption and maximize recovery in these cases.

Final Thoughts

Sweep networks are a core part of how modern business banking works at scale. They offer a straightforward way to increase deposit protection without introducing new complexity to your operations.

At Slash, we’ve built Enhanced FDIC Insurance into every account using a robust sweep network. That means founders and operators can focus on building their businesses without worrying about whether their capital is adequately protected.

If you’re holding more than $250K, or planning to soon, understanding how your money is protected is essential. With sweep networks, the infrastructure is already in place to scale your coverage as you grow.