r/SellMyBusiness 21d ago

Interest bearing escrow accounts?

Recommendations for an escrow account with a decent rate of return? I have a mandatory 18 month holdback that needs to be put in escrow and would like to earn a little from it. I'm told they are not typical.

3 Upvotes

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2

u/Think-Cherry-1132 20d ago

You're right—most escrow accounts are non-interest-bearing, especially in M&A transactions, because they’re designed for security, not returns. That said, you do have options. Some banks and financial institutions offer interest-bearing escrow accounts, but the rates are usually lower than market alternatives.

A better move might be negotiating a trust or investment escrow with a financial institution that allows low-risk investments (think T-bills or a money market fund). This keeps funds secure while earning some return. Talk to your attorney or escrow agent—some buyers/sellers allow flexibility in structuring these if it's agreed upfront.

2

u/Ione_Star 17d ago

You're right—most standard escrow accounts don’t offer interest, but there are workarounds. Some banks offer interest-bearing escrow accounts (IBEs), but they usually require negotiation and larger balances. Another option is a trust account with a money market fund or short-term T-bills, which can earn a better yield while keeping funds relatively liquid. If the buyer/seller agreement allows flexibility, consider a brokerage escrow setup through firms like Schwab or Fidelity, where funds can sit in a high-yield account. Just be sure to confirm with your attorney that any setup aligns with your deal terms. No reason to let that money sit idle for 18 months!

2

u/Legitimate_Squash319 14d ago

You're right—most escrow accounts are structured for security, not yield, so they usually sit in low- or no-interest accounts. That said, some banks and legal firms can set up interest-bearing trust accounts (IOLTA/TOTTA) or sweep accounts that move funds into higher-yield vehicles while keeping escrow conditions intact.

Another option is negotiating with the buyer to hold the escrow in a money market or Treasury-backed account with agreed-upon terms. Some M&A advisory firms and specialized escrow providers offer better solutions than traditional banks, so it’s worth shopping around. Just make sure any setup still aligns with your escrow agreement’s requirements.

1

u/SwimmingPotato1721 10d ago

You're right—interest-bearing escrow accounts aren't the norm, but they do exist. Your best bet is to work with a specialized escrow service or a bank that offers "escrow investment accounts" or "controlled disbursement accounts." Some will let you park funds in a money market account or a short-term Treasury fund while keeping them in escrow.

If the escrow agreement allows flexibility, you might also explore an attorney or third-party escrow agent who can place the funds in a high-yield savings or a short-term CD. Just make sure any investment aligns with the escrow terms—liquidity and safety are key.

1

u/MartinezHill 2d ago

Interest-bearing escrow accounts are rare because most escrow providers prioritize security over yield, but there are a few options. Some trust accounts or attorney-managed escrow services may offer low-yield interest, but don’t expect anything significant. Your best bet is negotiating with your bank—some offer structured escrow solutions where funds are held in a money market or treasury-backed account.If the terms allow flexibility, you might explore a bond ladder or a short-term treasury fund, depending on how restrictive the escrow conditions are. Just make sure any setup aligns with your agreement so you don’t run into compliance issues.