A lock box agreement is a service offered by banks to companies in which the company receives payments by mail to a post office box and the bank picks up the payments several times a day, deposits them into the company's account, and notifies the company of the deposit. This enables the company to put the money to work as soon as it's received, but the amounts must be large in order for the value obtained to exceed the cost of the service.
This lock box agreement is to be used by the collateral agent for a syndicate of banks to receive, control and apply to the Borrower's line of credit, payments made on the debtor's accounts receivable collateral. This agreement when executed, perfects the secured party's security interest in funds in the lock box account by control under Uniform Commercial Code § 9-104(a)(3) by making the agent bank the owner of and party in whose name the account is held. Because the account is controlled by ownership in the name of the secured party, the lock box bank cannot offset claims it has against the debtor against the account as provided in Uniform Commercial Code § 9-340(c). To avoid any doubt on this issue, the lock box bank expressly waives its rights of setoff. On the other hand, the agent bank agrees to indemnify the lock box bank for any unpaid fees or claims concerning the account, in the event the debtor fails to do so.
This form is a generic example that may be referred to when preparing such a form for your particular state. It is for illustrative purposes only. Local laws should be consulted to determine any specific requirements for such a form in a particular jurisdiction.
Arkansas Lock Box Agreement is a type of cash management system that allows lenders to have control over the cash flow generated by borrowers' receivables. This agreement is a critical component of commercial lending and financial management. Under the Arkansas Lock Box Agreement, a borrower designates a specific bank or financial institution as the "lock box bank." This bank receives and processes all incoming payments from the borrowers' customers. The purpose of this arrangement is to streamline the cash collection process, ensuring that the lender has immediate access to funds generated from the borrower's receivables. In the Arkansas Lock Box Agreement, various types and variations exist to cater to different needs and preferences. These may include: 1. Basic Lock Box: This is the standard arrangement where the borrower's customers' payments are redirected to a dedicated lock box bank account. The lock box bank then processes the payments and deposits the funds directly into the lender's account. The lender has complete control over the funds and can utilize them for loan repayments, interest payments, or other purposes according to the agreed-upon terms. 2. Concentration Lock Box: In this type of Arkansas Lock Box Agreement, multiple lock box accounts are established across different geographic locations or business units. The funds collected in these accounts are consolidated into a central concentration account held by the lock box bank. This allows for improved cash management and greater visibility into cash flow across various segments of the borrower's business. 3. Controlled Disbursement Lock Box: This type of agreement offers an additional level of control for the lender. The lock box bank provides the lender with early morning information on the checks received and deposited the previous day. The lender can then determine the available funds and make decisions accordingly, enabling better cash management and improved forecasting. 4. Electronic Lock Box: As technology advances, electronic lock box agreements have become increasingly prevalent. In this arrangement, the borrower's customers make electronic payments directly to a designated lock box account. These payments can be made through ACH transfers, wire transfers, or other electronic payment methods. The lock box bank automatically receives and processes these payments, providing the lender with real-time access to funds. Overall, the Arkansas Lock Box Agreement serves as an effective cash management system for lenders, offering control over the borrower's cash flow and ensuring timely access to funds. With different types of lock box arrangements available, lenders can choose the most suitable option based on their specific requirements and the borrower's needs. This system minimizes the risk of late or missed payments, enhances financial control, and enables efficient fund allocation.Arkansas Lock Box Agreement is a type of cash management system that allows lenders to have control over the cash flow generated by borrowers' receivables. This agreement is a critical component of commercial lending and financial management. Under the Arkansas Lock Box Agreement, a borrower designates a specific bank or financial institution as the "lock box bank." This bank receives and processes all incoming payments from the borrowers' customers. The purpose of this arrangement is to streamline the cash collection process, ensuring that the lender has immediate access to funds generated from the borrower's receivables. In the Arkansas Lock Box Agreement, various types and variations exist to cater to different needs and preferences. These may include: 1. Basic Lock Box: This is the standard arrangement where the borrower's customers' payments are redirected to a dedicated lock box bank account. The lock box bank then processes the payments and deposits the funds directly into the lender's account. The lender has complete control over the funds and can utilize them for loan repayments, interest payments, or other purposes according to the agreed-upon terms. 2. Concentration Lock Box: In this type of Arkansas Lock Box Agreement, multiple lock box accounts are established across different geographic locations or business units. The funds collected in these accounts are consolidated into a central concentration account held by the lock box bank. This allows for improved cash management and greater visibility into cash flow across various segments of the borrower's business. 3. Controlled Disbursement Lock Box: This type of agreement offers an additional level of control for the lender. The lock box bank provides the lender with early morning information on the checks received and deposited the previous day. The lender can then determine the available funds and make decisions accordingly, enabling better cash management and improved forecasting. 4. Electronic Lock Box: As technology advances, electronic lock box agreements have become increasingly prevalent. In this arrangement, the borrower's customers make electronic payments directly to a designated lock box account. These payments can be made through ACH transfers, wire transfers, or other electronic payment methods. The lock box bank automatically receives and processes these payments, providing the lender with real-time access to funds. Overall, the Arkansas Lock Box Agreement serves as an effective cash management system for lenders, offering control over the borrower's cash flow and ensuring timely access to funds. With different types of lock box arrangements available, lenders can choose the most suitable option based on their specific requirements and the borrower's needs. This system minimizes the risk of late or missed payments, enhances financial control, and enables efficient fund allocation.
