Lockbox
A lockbox is a third-party-controlled bank account that intercepts and disburses a merchant's deposits — used in MCA primarily as a collection enforcement mechanism for higher-risk deals or as a recovery structure for stacked or distressed merchants.
Why This Matters
Lockbox structures route the merchant's revenue through an intermediary account before funds reach the operating account. The intermediary deducts the funder's holdback amount before forwarding the remainder to the merchant. Lockbox structures are more controlling than ACH split — the merchant cannot easily redirect deposits to bypass collection. For this reason, lockboxes are commonly required in stacked deals (where multiple funders need coordinated collection), high-risk deals (where standard ACH risk is unacceptable), and workout situations (where deals have defaulted and collection requires structural intervention).
Example
Stacked merchant with three active MCA positions enters lockbox arrangement. All revenue routes through Lockbox Bank: 12% to Funder A (first position), 8% to Funder B (second), 6% to Funder C (third), remainder forwarded to merchant. Total 26% revenue diversion, but coordinated structure protects all funders' positions.
Frequently Asked Questions
Frequently Asked Questions
When is a lockbox required in MCA?
Higher-risk first-position deals where funder needs collection certainty. Stacked deals where multiple positions require coordinated repayment. Restructured workout situations where original ACH or processor split has failed. Some specialty programs require lockbox as standard structure.
Can a merchant operate normally with a lockbox?
Yes — operationally the merchant accepts payments normally; the lockbox handles disbursement. But the structure adds 1-2 day delay between revenue and merchant access, and reduces flexibility on emergency cash management. Most merchants prefer to avoid lockbox structures when possible.