Lockbox Accounts In Mexico

A party extending a loan to a Mexican borrower might require that the borrower's accounts receivable be paid directly into a blocked bank account, frequently referred to in U.S. parlance as a "lockbox account," at a commercial bank. In such an arrangement, the lender usually requires the borrower to issue a standing instruction to the effect that funds in the account are automatically transferred to the lender for application to payments due on the loan.

This practice is intended to reduce the risk that the borrower will use payments on its receivables for purposes other than servicing the loan. This type of arrangement also reduces the risk that the borrower's other creditors will attach payments on such receivables and apply them towards the borrower's other obligations. Lockbox arrangements are often linked to collateral arrangements under which the borrower grants the lender a security interest in the borrower's accounts receivable and, where appropriate, in