On the other hand, the bank lockbox can also be very risky. Bank employees who have access to lockers are rarely monitored, which opens the door to possible fraud. Fraud is mainly in the form of tampering with control, because the cheques in the lock boxes provide all the information necessary for counterfeiting. Part of lock-box processing is daily, allowing companies to increase their control and efficiency in debt management while improving audit controls and data security. Businesses benefit from enhanced reporting features with daily access to deposit amounts, fund availability and payment information, including electronic payment images and processed coupons. Click on the image to view a flow diagram of how funds are moved into the hard lockbox for companies that receive a large volume of payments or headline cheques accompanied by wire transfer documents. With advanced lock-box technology, banks have set up several communication hubs that companies can use for payments and deposits. Soft Lockbox: The borrower has some control over the cash flow of the property. How it works: The soft lockboxes work mainly in two ways: (A) All rents of the property are deposited into an account controlled by the lenders (also called lockbox account) and are then paid to the borrower; or (B) Rents are deposited into the controlled account, transferred to the cash management account and remain there until an amount equivalent to the payment of the debt service is insured. As soon as this happens, the excess funds are swept to the borrower and the debt service is transferred to the lender on the day of payment. It has become quite common for loans that have been taken out for the CMBS market to contain some form of place locking or springing mechanism.
Cash/lock-box management requirements are reinforced by a combination of rating agencies, CMBS bond investors and service providers, all of which have additional security liquidity management. Wholesale boxes are for business-to-business payments and are generally higher dollar amounts than retail lock transactions. These transactions generally do not contain a standardized payment coupon and require more manual effort for the bank to process. A national bank offers most of the cash management and lock-box services, which is why we have included their estimated prices in our descriptions. However, new suppliers are entering the market, which I hope will put downward pressure on pricing. All of the following options require the borrower to pay an installation fee at Lockbox Bank. Currently, approximately $2,500 is charged for the initial installation fee. An electronic lockbox service replaces the physical address of a traditional box with a digital web address and replaces paper cheques with electronic means such as eChecks, ACH, debit cards, credit cards and electronic bank transfers.