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.
Houston Texas Lock Box Agreement as Cash Management System with Lenders A Houston Texas Lock Box Agreement is a contractual arrangement between a borrower (typically a business) and a lender that facilitates efficient cash management. It is a popular cash management system utilized by borrowers to streamline the handling and processing of incoming payments from customers or clients. This agreement helps improve the borrower's cash flow and provides the lender with increased control and visibility over the borrower's funds. Under a Houston Texas Lock Box Agreement, the borrower establishes a lock box account with a designated bank in Houston, Texas. This account acts as a centralized depository for all incoming payments made by the borrower's customers or clients. The lock box account is managed by the lender, ensuring that funds are promptly collected, processed, and deposited into the borrower's main operating account. The primary objective of a Houston Texas Lock Box Agreement is to expedite payment processing and minimize the "float" period, which is the time it takes for funds to be converted into available cash. By routing payments directly to the lock box account, the borrower can significantly reduce the time and effort typically involved in handling and depositing checks or other forms of payment. This streamlined process ultimately accelerates the availability of funds, allowing the borrower to access cash sooner. Benefits of a Houston Texas Lock Box Agreement: 1. Enhanced cash flow management: Prompt depositing and availability of funds provide the borrower with improved cash flow forecasting and working capital management. 2. Increased efficiency: Automation of payment processing eliminates manual tasks, reducing administrative costs and freeing up valuable time and resources. 3. Improved cash collection: The lender's involvement in the process ensures accelerated funds collection, reducing the risk of late or missed payments. 4. Enhanced reporting and transparency: The lock box system generates detailed reports, providing the borrower and lender with real-time visibility into payment activity. Types of Houston Texas Lock Box Agreements: 1. Basic Lock Box Agreement: This type of agreement involves the borrower opting for a single, centralized lock box account to handle all payments. 2. Multiple Lock Box Agreement: In situations where the borrower has a geographically dispersed customer base, multiple lock box accounts are established in different regions to expedite payment processing and maximize convenience for customers. 3. Concentration Banking Lock Box Agreement: This agreement involves consolidating funds from multiple lock box accounts into a single master account. It allows the borrower to centralize funds for efficient cash management while maintaining separate lock box accounts for clients or customers. In conclusion, a Houston Texas Lock Box Agreement as a cash management system with lenders offers numerous advantages for borrowers, including enhanced cash flow, improved efficiency, and increased transparency. By utilizing this agreement, businesses can optimize their payment processing procedures and strengthen their financial position.Houston Texas Lock Box Agreement as Cash Management System with Lenders A Houston Texas Lock Box Agreement is a contractual arrangement between a borrower (typically a business) and a lender that facilitates efficient cash management. It is a popular cash management system utilized by borrowers to streamline the handling and processing of incoming payments from customers or clients. This agreement helps improve the borrower's cash flow and provides the lender with increased control and visibility over the borrower's funds. Under a Houston Texas Lock Box Agreement, the borrower establishes a lock box account with a designated bank in Houston, Texas. This account acts as a centralized depository for all incoming payments made by the borrower's customers or clients. The lock box account is managed by the lender, ensuring that funds are promptly collected, processed, and deposited into the borrower's main operating account. The primary objective of a Houston Texas Lock Box Agreement is to expedite payment processing and minimize the "float" period, which is the time it takes for funds to be converted into available cash. By routing payments directly to the lock box account, the borrower can significantly reduce the time and effort typically involved in handling and depositing checks or other forms of payment. This streamlined process ultimately accelerates the availability of funds, allowing the borrower to access cash sooner. Benefits of a Houston Texas Lock Box Agreement: 1. Enhanced cash flow management: Prompt depositing and availability of funds provide the borrower with improved cash flow forecasting and working capital management. 2. Increased efficiency: Automation of payment processing eliminates manual tasks, reducing administrative costs and freeing up valuable time and resources. 3. Improved cash collection: The lender's involvement in the process ensures accelerated funds collection, reducing the risk of late or missed payments. 4. Enhanced reporting and transparency: The lock box system generates detailed reports, providing the borrower and lender with real-time visibility into payment activity. Types of Houston Texas Lock Box Agreements: 1. Basic Lock Box Agreement: This type of agreement involves the borrower opting for a single, centralized lock box account to handle all payments. 2. Multiple Lock Box Agreement: In situations where the borrower has a geographically dispersed customer base, multiple lock box accounts are established in different regions to expedite payment processing and maximize convenience for customers. 3. Concentration Banking Lock Box Agreement: This agreement involves consolidating funds from multiple lock box accounts into a single master account. It allows the borrower to centralize funds for efficient cash management while maintaining separate lock box accounts for clients or customers. In conclusion, a Houston Texas Lock Box Agreement as a cash management system with lenders offers numerous advantages for borrowers, including enhanced cash flow, improved efficiency, and increased transparency. By utilizing this agreement, businesses can optimize their payment processing procedures and strengthen their financial position.
