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.
Iowa Lock Box Agreement as a Cash Management System with Lenders The Iowa Lock Box Agreement is a cash management system designed to streamline financial transactions between borrowers and lenders. It involves a legal agreement between a borrower and a lender, where the borrower's cash receipts are sent directly to a designated lockbox location in Iowa. This cash management system acts as a centralized hub for processing and managing funds received from customers or clients. The lockbox system helps to expedite the collection process and ensures timely deposit of funds into the lender's account. The Iowa Lock Box Agreement offers several benefits to lenders. Firstly, it enhances the efficiency of funds handling by eliminating the need to manually process and deposit incoming payments. By using lockbox services, lenders can free up their resources and dedicate them to more critical aspects of their operations. Secondly, this cash management system increases the speed of cash flow, allowing lenders to access and invest funds sooner. It eliminates delays associated with mail-in payments or physical checks, as all incoming funds are directly sent to the designated lockbox in Iowa. Additionally, the Iowa Lock Box Agreement offers greater accuracy and transparency in financial transactions. Each payment received is processed through automated systems, reducing the risk of human error or misplacement. Moreover, lenders can easily monitor and track the status of incoming funds and associated transaction details. There are different types of Iowa Lock Box Agreements available, depending on the specific needs of lenders. These may include: 1. Retail Lockbox: Designed for lenders with a large volume of individual customer payments. Typically, used by companies in the retail and consumer goods sectors, this type of lockbox system is optimized for processing a high influx of small payments. 2. Wholesale Lockbox: Geared towards lenders dealing with business-to-business transactions. This lockbox agreement is tailored for companies that receive a substantial number of payment checks from other businesses. 3. Computerized Lockbox: An advanced lockbox agreement that utilizes cutting-edge technology and software to automate the processing of incoming payments. This type of lockbox system involves sophisticated imaging technology to capture check images and allows for electronic payment processing. In conclusion, the Iowa Lock Box Agreement as a cash management system with lenders provides an efficient, accurate, and streamlined approach to handle incoming funds. This agreement offers various types of lockbox systems tailored to specific needs, ensuring faster cash flow and simplifying financial transactions for lenders.
