Lockbox

A payment address or account controlled by the factor to receive customer payments.

Why it matters

Payments sent to the wrong account can delay reserve release and create reconciliation problems. Proper lockbox setup and customer compliance are essential.

How it appears in contracts

The lockbox arrangement is defined in the 'Remittance' or 'Collections' section and referenced in the notice of assignment template. The factor establishes a bank account in their name—or in a neutral third-party bank's name—and the lockbox address becomes the payment destination in every NOA you send. The contract specifies: (1) who controls the lockbox account (always the factor); (2) how frequently remittance reports are provided to you; and (3) what happens if a customer sends payment directly to your account after receiving the NOA—most agreements require you to hold such funds in trust and forward them to the factor within 24 to 48 hours or face a default event. Confirm the lockbox routing instructions before submitting any invoices for funding.

Related terms

Related article: What is invoice factoring?

Related reading

Sources

  • International Factoring Association - International Factoring Association. Accessed 2026-05-19. Industry association source for factoring terminology and industry context.
  • Secured Finance Network - Secured Finance Network. Accessed 2026-05-19. Industry education source for secured finance and asset-based lending context.
Financial disclaimer. This page is educational only and is not financial, legal, tax, accounting, or credit advice. Factoring terms vary by provider and contract. Read the full disclaimer.