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 Washington Lock Box Agreement is a cash management system that is commonly used by lenders to ensure efficient and secure processing of payments from borrowers. This agreement is an essential tool for managing and overseeing the flow of funds in a lending arrangement. The primary purpose of a Washington Lock Box Agreement is to establish a designated bank account, known as the "lock box," where all borrower payments are directed. The lock box is typically managed by a third-party agent, such as a bank or financial institution, acting as a custodian of the funds. This arrangement provides lenders with greater control and visibility over borrower payments, thereby minimizing the risk of misappropriation or payment delays. Under this cash management system, borrowers are instructed to send all payments, such as principal and interest payments, directly to the lock box address instead of making payments directly to the lender. The lock box agent is responsible for receiving, processing, and depositing these payments into the lock box account promptly. Lenders benefit from a Washington Lock Box Agreement in several ways. Firstly, it ensures faster payment processing, as the lock box agent can swiftly handle incoming payments and deposit funds into the designated account. This increases cash flow predictability and liquidity for the lender. Secondly, the agreement enables enhanced monitoring and reconciliation of borrower payments. Lenders receive regular reports from the lock box agent, detailing each payment received, allowing for efficient tracking and identification of any discrepancies or outstanding amounts. Furthermore, by employing a Washington Lock Box Agreement, lenders minimize the risk of potential fraud or misuse of funds. The lock box account operates independently and prevents any unauthorized access or diversion of payments, strengthening the security of the entire lending operation. It's important to note that while the term "Washington Lock Box Agreement" generally refers to the standard cash management system described above, there may be variations or specific types of these agreements tailored to meet the unique needs of different lenders and borrowers. Some examples include: 1. Automatic Sweep Lock Box Agreement: In this type of agreement, excess funds that accumulate in the lock box account are automatically "swept" into another account, such as an interest-bearing account or an investment vehicle designated by the lender. This feature allows lenders to maximize the utilization of funds and potentially earn additional income. 2. Controlled Disbursement Lock Box Agreement: Under this arrangement, the lock box agent provides the lender with detailed information regarding the daily cash inflows, allowing the lender to precisely forecast the available funds for disbursement. This enables better cash flow management and facilitates efficient decision-making processes for the lender. 3. Lock Box Collateralized Loan Agreement: In certain lending scenarios, borrowers may offer collateral as security against the loan. In this case, the lender may implement a lock box agreement specifically designed to hold and manage the collateral. The lock box agent ensures that the collateral remains secure and can release it upon fulfillment of certain conditions or loan repayments. Overall, the Washington Lock Box Agreement as a cash management system with lenders provides a robust framework for streamlining payment processing, enhancing security, and improving cash flow management in lending arrangements.The Washington Lock Box Agreement is a cash management system that is commonly used by lenders to ensure efficient and secure processing of payments from borrowers. This agreement is an essential tool for managing and overseeing the flow of funds in a lending arrangement. The primary purpose of a Washington Lock Box Agreement is to establish a designated bank account, known as the "lock box," where all borrower payments are directed. The lock box is typically managed by a third-party agent, such as a bank or financial institution, acting as a custodian of the funds. This arrangement provides lenders with greater control and visibility over borrower payments, thereby minimizing the risk of misappropriation or payment delays. Under this cash management system, borrowers are instructed to send all payments, such as principal and interest payments, directly to the lock box address instead of making payments directly to the lender. The lock box agent is responsible for receiving, processing, and depositing these payments into the lock box account promptly. Lenders benefit from a Washington Lock Box Agreement in several ways. Firstly, it ensures faster payment processing, as the lock box agent can swiftly handle incoming payments and deposit funds into the designated account. This increases cash flow predictability and liquidity for the lender. Secondly, the agreement enables enhanced monitoring and reconciliation of borrower payments. Lenders receive regular reports from the lock box agent, detailing each payment received, allowing for efficient tracking and identification of any discrepancies or outstanding amounts. Furthermore, by employing a Washington Lock Box Agreement, lenders minimize the risk of potential fraud or misuse of funds. The lock box account operates independently and prevents any unauthorized access or diversion of payments, strengthening the security of the entire lending operation. It's important to note that while the term "Washington Lock Box Agreement" generally refers to the standard cash management system described above, there may be variations or specific types of these agreements tailored to meet the unique needs of different lenders and borrowers. Some examples include: 1. Automatic Sweep Lock Box Agreement: In this type of agreement, excess funds that accumulate in the lock box account are automatically "swept" into another account, such as an interest-bearing account or an investment vehicle designated by the lender. This feature allows lenders to maximize the utilization of funds and potentially earn additional income. 2. Controlled Disbursement Lock Box Agreement: Under this arrangement, the lock box agent provides the lender with detailed information regarding the daily cash inflows, allowing the lender to precisely forecast the available funds for disbursement. This enables better cash flow management and facilitates efficient decision-making processes for the lender. 3. Lock Box Collateralized Loan Agreement: In certain lending scenarios, borrowers may offer collateral as security against the loan. In this case, the lender may implement a lock box agreement specifically designed to hold and manage the collateral. The lock box agent ensures that the collateral remains secure and can release it upon fulfillment of certain conditions or loan repayments. Overall, the Washington Lock Box Agreement as a cash management system with lenders provides a robust framework for streamlining payment processing, enhancing security, and improving cash flow management in lending arrangements.
