Banks typically require a minimum cash requirement to reduce their risk. The bank’s goal with this term is to ensure there is adequate cash in the bank account to cover a big portion of the loan if things go poorly. Banks are federally regulated because they loan out other companies’ deposits so they can’t take a lot of risks. The minimum cash requirement limits their risk. This is not a good term for the startup because you’re effectively borrowing your own money and can’t use the capital to extend runway as long as you would like.An example of a minimum cash requirement is a bank that could provide a $2 million loan, but it requires $1 million to stay in the bank at all times. Therefore the startup only really gets to spend $1 million of the loan extending its runway.Kruze Consulting aggressively negotiates these out of term sheets whenever possible. If you can’t get it out of your term sheet, then push to reduce the minimum cash requirement as much as possible. Reducing the minimum cash requirement means you are maximizing your runway so you can hit your milestones and raise a big equity round in the future.