Deposit Account Control Escrow Architecture for Consignment Cash Proceeds Tracing Protocols
A structured DACA lockbox architecture segregates consignment proceeds at collection, preserving UCC Article 9 cash security priority against lender liens.
Blocked Accounts
Meaning
Banking arrangements that secure lender control over a borrower’s incoming revenue restrict cash withdrawals until specific obligations are met. Distribution contracts use blocked accounts to direct customer payments into a designated depository before the distributor can access any profits. This structure protects the supplier by establishing a direct claim on cash flow prior to any generic disbursement.
Deposit Control
Commercial agreements outline the conditions under which a bank must follow the instructions of the secured party rather than the debtor. Under this arrangement, blocked accounts prevent the borrower from moving funds to unapproved bank accounts or using cash for unauthorized corporate activities.
Revenue Trigger
Payment triggers exist in several forms, ranging from daily sweeps to situational freezes that occur only when a covenant is breached. The distributor must maintain a minimum performance threshold, below which the supplier can freeze the funds entirely and redirect them to settle outstanding trade debt. This control mechanism is useful for managing relationships with distributors in highly volatile regions where liquidity and bankruptcy risks are elevated.
Disbursement Priority
Funds accumulated in the account are distributed according to a contractually defined waterfall. The supplier is paid first for the landed cost of goods, after which the distributor receives the remaining commission or margin.