Lockbox: Meaning in a Merchant Cash Advance
A lockbox is an arrangement where your card sales are deposited into an account the funder controls, which takes its share and sends the rest to you. It's an older way of collecting a merchant cash advance and is less common today.
What does lockbox mean?
Think of a lockbox as a middle account. Your processor sends the day's card deposits there instead of straight to your bank. The funder, or a company it hires, keeps its agreed percentage and forwards the remainder to your business account. You never handle the funder's share, and the funder never has to debit your account.
Why does lockbox matter to your business?
A lockbox changes your cash timing. The money you keep arrives a little later, after it passes through the lockbox, and you need to set your processor up correctly for it to work. It also ties your processing to the arrangement until the advance is paid. If you're offered one, ask how fast the remainder reaches you and what happens if you need to switch processors.
Can you switch processors during an advance?
Moving to a new card processor while a lockbox is in place needs the funder's cooperation, since the new processor has to route deposits to the lockbox account. Talk to the funder before you switch so your sales keep flowing and nothing looks like diverted receivables.
Where will you see it?
In the payment section of older style contracts and in processor setup forms. Your processing statement shows deposits going to an account other than your own.
How does it compare?
Split processing, where the processor itself divides the batch, and daily ACH debits have largely replaced lockboxes. All three collect the same agreed share. They differ in who touches the money first.
Which terms are related to lockbox?
The full list is in the glossary. Owners ask about this in Can I make extra payments on my merchant cash advance?.
A term on your offer you don't recognize?
Send us the line and we'll tell you what it means. Call 877-FUND-654 with any question. We call you back, usually the same business day, and we always talk with you before we shop your file.