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.
South Dakota Lock Box Agreement is a cash management system offered by lenders to borrowers, primarily in the commercial real estate industry. It is designed to streamline the handling of loan payments and ensure efficient cash flow management between borrowers and lenders. Keywords: South Dakota, Lock Box Agreement, cash management, system, lenders, borrowers, commercial real estate, loan payments, cash flow management. The South Dakota Lock Box Agreement provides borrowers with a secure and centralized method for collecting and managing loan payments. Under this agreement, a designated lock box account is established in South Dakota, where borrowers are required to direct all their loan payments. The lock box account acts as a central hub, enabling lenders to efficiently monitor incoming payments, reconcile issues, and manage cash flow. This arrangement also safeguards lenders' interests by ensuring that loan payments are promptly deposited and accounted for. There are different types of South Dakota Lock Box Agreements based on the specific needs and preferences of borrowers and lenders. These may include: 1. Standard South Dakota Lock Box Agreement: This type of agreement follows the traditional cash management system, where all loan payments are directed to the South Dakota lock box account. Lenders closely monitor these accounts, ensuring accurate and timely funds collection. 2. Escrow South Dakota Lock Box Agreement: In certain cases, lenders may require borrowers to deposit additional funds into the lock box account as a form of escrow, which can be later used for property tax payments, insurance premiums, or other relevant expenses. 3. Limited South Dakota Lock Box Agreement: Under this arrangement, only specific loan payments such as principal and interest are directed to the South Dakota lock box account, while other payments, such as late fees or penalties, may be handled differently. 4. Tiered South Dakota Lock Box Agreement: In certain scenarios, borrowers with multiple properties or loans may opt for a tiered lock box agreement. This structure allows for the segregation of loan payments based on specific properties, ensuring clear allocation and management of funds. The South Dakota Lock Box Agreement as a cash management system with lenders offers various benefits, such as increased efficiency in processing loan payments, enhanced cash flow management, and improved transparency. It provides borrowers with a reliable method to ensure timely payments, while lenders can have better control over their loan portfolio and cash flow. In summary, the South Dakota Lock Box Agreement as a cash management system with lenders offers a secure and streamlined approach to handle loan payments, benefiting both borrowers and lenders in the commercial real estate industry.
