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.
Massachusetts Lock Box Agreement is a cash management system used by lenders to control and manage their cash flows efficiently. This system allows lenders to encrypt funds from borrowers into a separate bank account, which is operated by a designated third-party custodian. The funds received from borrowers are then swiftly deposited into this account. One key advantage of the Massachusetts Lock Box Agreement is that it enhances the transparency and security of the lending process for both lenders and borrowers. This system ensures that all payments made by borrowers are promptly received and reconciled, minimizing any chances of fraud or accounting errors. It also provides an efficient mechanism for lenders to manage their cash inflows. There are different types or variations of the Massachusetts Lock Box Agreement: 1. Basic Lock Box Agreement: This is the traditional model where the lender establishes a single lock box account with a custodian bank. All borrower payments are directly deposited into this account, providing a centralized mechanism for cash management. 2. Concentration Lock Box Agreement: In this arrangement, the lender may operate multiple lock box accounts, with each specifically designated for a particular geographical region or group of borrowers. This approach allows for better cash flow visibility and streamlining of funds. 3. Controlled Disbursement Lock Box Agreement: Under this structure, the lender receives information regarding the pending checks deposited in the lock box account before they are credited. This knowledge enables the lender to efficiently manage their cash position by making informed decisions regarding disbursements and funding requirements. 4. Online Lock Box Agreement: With the advancement of technology, this type of agreement allows lenders to receive borrower payments electronically through online platforms. The use of electronic payment channels facilitates faster and more automated processing, reducing delays and manual intervention. The Massachusetts Lock Box Agreement as a cash management system with lenders offers benefits such as streamlined cash flow management, improved security, and enhanced transparency. It not only strengthens the lender's position but also instills confidence in borrowers by ensuring that their payments are handled securely and efficiently.Massachusetts Lock Box Agreement is a cash management system used by lenders to control and manage their cash flows efficiently. This system allows lenders to encrypt funds from borrowers into a separate bank account, which is operated by a designated third-party custodian. The funds received from borrowers are then swiftly deposited into this account. One key advantage of the Massachusetts Lock Box Agreement is that it enhances the transparency and security of the lending process for both lenders and borrowers. This system ensures that all payments made by borrowers are promptly received and reconciled, minimizing any chances of fraud or accounting errors. It also provides an efficient mechanism for lenders to manage their cash inflows. There are different types or variations of the Massachusetts Lock Box Agreement: 1. Basic Lock Box Agreement: This is the traditional model where the lender establishes a single lock box account with a custodian bank. All borrower payments are directly deposited into this account, providing a centralized mechanism for cash management. 2. Concentration Lock Box Agreement: In this arrangement, the lender may operate multiple lock box accounts, with each specifically designated for a particular geographical region or group of borrowers. This approach allows for better cash flow visibility and streamlining of funds. 3. Controlled Disbursement Lock Box Agreement: Under this structure, the lender receives information regarding the pending checks deposited in the lock box account before they are credited. This knowledge enables the lender to efficiently manage their cash position by making informed decisions regarding disbursements and funding requirements. 4. Online Lock Box Agreement: With the advancement of technology, this type of agreement allows lenders to receive borrower payments electronically through online platforms. The use of electronic payment channels facilitates faster and more automated processing, reducing delays and manual intervention. The Massachusetts Lock Box Agreement as a cash management system with lenders offers benefits such as streamlined cash flow management, improved security, and enhanced transparency. It not only strengthens the lender's position but also instills confidence in borrowers by ensuring that their payments are handled securely and efficiently.
