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.
The Louisiana Lock Box Agreement is a cash management system utilized by lenders in the state of Louisiana. It functions as a secure arrangement for managing funds between borrowers and lenders, ensuring efficient and timely payment processing while minimizing the risk of default. Under this agreement, borrowers are required to direct all payments, including checks and electronic transfers, to a designated lock box account held by a third-party bank. This bank acts as a neutral intermediary, receiving and processing all incoming funds on behalf of the lender. The lock box account is typically established in a Louisiana-based financial institution to facilitate seamless cash flow management within the state. Once funds are deposited into the lock box account, the bank swiftly processes the payments and promptly credits them to the lender's account. This arrangement allows for the seamless collection of payments while also enabling lenders to access funds quickly and efficiently. By utilizing the Louisiana Lock Box Agreement, lenders can effectively monitor and manage the cash flow associated with their loan portfolios. There are several types of Louisiana Lock Box Agreement as Cash Management System with Lenders that cater to specific needs and preferences. These include: 1. Standard Louisiana Lock Box Agreement: This is the most common type of lock box arrangement, enabling lenders to streamline payment processing and optimize cash flow management. 2. Electronic Lock Box Agreement: In this variation, payments are made using electronic means such as wire transfers or electronic fund transfers (Eats). This digital approach expedites payment processing and reduces the reliance on paper checks. 3. Remote Deposit Capture Lock Box Agreement: With this type of lock box agreement, borrowers can deposit funds directly into the designated lock box account using remote deposit capture technology. This method eliminates the need for physical checks and accelerates the payment processing timeline. 4. Virtual Lock Box Agreement: A virtual lock box agreement allows lenders to receive payments electronically through a secure online portal. This arrangement provides convenience and flexibility for borrowers, as they can initiate payments from any location. In summary, the Louisiana Lock Box Agreement serves as a robust cash management system for lenders operating in the state. By utilizing a designated lock box account held by a third-party bank, lenders can efficiently process payments and maintain control over their loan portfolios. With different variations available, borrowers and lenders can choose an agreement that best suits their specific requirements, whether it be a standard agreement, electronic lock box, remote deposit capture lock box, or virtual lock box.
