[Kevin Henry-Seacoast]

Bob,

Most bank factors and non-bank factors use lock-box systems that are controlled by the factor and or bank. Some ABL lenders do as well.... That being said, cash from all receivables is controlled through the lockbox. An ACH withdrawl could never happen through the lockbox, but can happen through the Company's operating account. Most lenders will cover all the assets of the business in the lender's agreement up to and including cash. If a business owner and lender enter a subsequent agreement that allows any asset to be used as collateral without the first lender's approval or a subordination agreement, one could certainly argue default, interference, and fraud. One should think about this when entering an agreement that disrupts and agreement with an FDIC insured institution....

[bdshaw]

I understand what you are saying Kevin but you missed my point. My discussion has to do with the advance company that collects by ach from the client's operating account could find the factor not depositing anymore advances or reserves into to it until they are paid out. This will dry up all but a minimum amount of available cash and often results in the company going out of business. A lockbox has nothing to do with it. As for the FDIC I thank you for pointing out that the advance company may be breaking a federal law and that will lead to more grief than losing money.
Kevin I would appreciate you comments on my post of creating a hybrid factoring/advance product. We both seem to deal with both and your input would be very valuable to me.
Bob