Deposit Account Control Agreements in Commercial Lending: A Borrower’s Guide

01

Understand the purpose before reviewing the form

A lender may request a deposit account control agreement so its security interest in a deposit account can be perfected through control under the applicable law. The agreement typically involves the borrower as customer, the bank that maintains the account, and the secured lender. It is separate from the loan agreement, deposit account terms, lockbox arrangements, account-analysis services, and any sweep or treasury-management documentation, although those documents must work together. Borrowers should ask counsel to explain the exact legal effect, priority, and remedies instead of assuming every control agreement operates the same way.

02

Inventory accounts, owners, and operating purpose

Create a schedule showing each legal account owner, depositary bank, account number reference, account type, current balance, average activity, authorized signers, linked services, pledged status, and business purpose. Distinguish operating, payroll, tax, merchant-settlement, lockbox, escrow, reserve, tenant-security, custodial, fiduciary, and project accounts. Confirm that each account belongs to the named borrower or pledgor and identify third-party funds or legal restrictions. The collateral schedule, organizational chart, financial statements, bank records, and loan documents should use consistent legal names.

• Requested amount and use of proceeds
• Historical and current financial statements
• Complete debt and ownership schedules
• Collateral and transaction documentation

03

Determine which accounts are actually in scope

A lender may seek control over all deposit accounts of a pledgor, only specified accounts, or a concentration account receiving collections. Some accounts may be excluded by agreement, law, program requirements, operational necessity, or lender policy. An exclusion should be explicit and documented rather than inferred from low activity or an informal understanding. If a business uses multiple banks, payment processors, merchant acquirers, or fintech interfaces, identify where funds legally settle and whether additional accounts, notices, assignments, or control arrangements are required.

04

Clarify immediate control versus a springing structure

Some arrangements permit the borrower to direct the account until the lender delivers a defined notice; others give the lender stronger control from closing or route receipts automatically through a controlled cash-management system. Read who may issue instructions, whether the depositary bank must follow them without further borrower consent, what notice activates exclusive control, and whether the borrower receives a copy. Also identify any grace period, release mechanism, reinstatement process, or lender discretion. These provisions can materially change operating access even if no money moves on the closing date.

05

Coordinate the depositary bank early

The bank maintaining the account usually has its own form, review process, fees, eligibility rules, authorized-signature requirements, and restrictions on amendments. It may require a new account, prohibit changes to standard language, decline control over certain products, or need time to configure notices and treasury services. Confirm the bank contact, required approvals, expected turnaround, execution method, account title, lender notice address, and effective date well before funding. A lender-approved document that the depositary bank will not sign does not satisfy the closing condition.

06

Protect payroll, taxes, receipts, and payment continuity

Map daily inflows and outflows through the proposed structure, including customer receipts, card settlements, payroll, payroll taxes, benefits, rent, debt service, vendor payments, wires, ACH origination, remote deposit, positive pay, sweeps, and intercompany transfers. Test how an activation notice, account freeze, cutoff time, fraud alert, or system outage would affect each critical payment. Do not move regulated, custodial, tenant, or third-party funds into a controlled operating account without qualified advice and documented authority.

07

Reconcile control with the rest of the collateral package

Compare the control agreement with UCC filings, security agreements, lockbox instructions, cash-management provisions, borrowing-base mechanics, intercreditor arrangements, existing lender rights, merchant agreements, and permitted-lien schedules. Resolve competing control claims, prior pledges, automatic sweeps, setoff rights, account liens, and termination requirements before closing. A payoff of an existing loan does not automatically release every account restriction, and a new control agreement does not by itself resolve every priority or ownership issue.

08

Build the agreement into closing and ongoing compliance

Track the final account schedule, approved form, signatures, effective time, bank acknowledgments, fees, activation contacts, notice methods, and evidence required for funding. After closing, retain the executed agreement and monitor account changes, new accounts, bank mergers, authorized signers, treasury services, minimum balances, reporting, and covenant requirements. Obtain required consent before closing, replacing, or materially changing a controlled account. PFCS can help organize the financing package and coordinate information with third-party capital sources, but the lender, depositary bank, and qualified counsel determine control, perfection, priority, operational restrictions, approval, and final terms.