District of Columbia Lock Box Agreement as Cash Management System with Lenders

State:
Multi-State
Control #:
US-03367BG
Format:
Word; 
Rich Text
Instant download

Description

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.

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  • Preview Lock Box Agreement as Cash Management System with Lenders
  • Preview Lock Box Agreement as Cash Management System with Lenders
  • Preview Lock Box Agreement as Cash Management System with Lenders
  • Preview Lock Box Agreement as Cash Management System with Lenders
  • Preview Lock Box Agreement as Cash Management System with Lenders
  • Preview Lock Box Agreement as Cash Management System with Lenders

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FAQ

Definition and Example of a Lockbox Payment Suppose you receive a bill from your electric company. It arrives in the mail with a remittance slip. You fill out the slip, enclose your check, and mail it off to a post office box in a nearby city. That post office box is your electric company's lockbox.

Lockbox services are designed to expedite the collection of paper-based payments and provide timely payment information to update accounts receivable records. Lockbox services are usually provided by a third-party processor (usually a bank) that receives, opens, and processes payments for a government or business.

Lockbox banking is a service provided by banks to help businesses streamline their accounts receivable process. It involves directing customers to send their payments to a designated lockbox address where the bank collects and processes the payments on behalf of the business.

Lockbox arrangement means the establishment of a mechanism to separate the asset pool receivables and the originating bank to preclude the co-mingling of funds.

Lockbox services are designed to expedite the collection of paper-based payments and provide timely payment information to update accounts receivable records. Lockbox services are usually provided by a third-party processor (usually a bank) that receives, opens, and processes payments for a government or business.

Definition for : Lockbox system Under a lockbox system, the creditor asks its debtors to send their payments directly to a post office box that is emptied regularly by the creditor's bank. The funds are immediately paid into the banking system, without first being processed by the creditor's accounting department.

Security interests in cash deposits can be perfected through the use of a ?lock box.? Under this arrangement, a borrower and a third party agree that payments on contracts entered into by a borrower are paid to a bank account which is in the possession and control of the lender.

Lockboxes Can Be Relatively Costly They also charge a service or transaction fee for each payment processed. People who use lockboxes for processing checks every month end up paying a lot in fees. The bank might be more efficient than your back office, but they still rely on manual effort and labor costs.

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District of Columbia Lock Box Agreement as Cash Management System with Lenders