Deposit Account Control Agreement

How a Deposit Account Control Agreement Works in Business Lending

A DACA establishes a formal control arrangement over a business’s deposit account, typically a checking or operating account, to secure a loan. Under UCC Article 9, perfection of a security interest in a deposit account requires “control,” and a signed DACA satisfies that legal standard. The agreement can operate in one of two modes: a “springing” or “dormant” DACA, where the lender only activates control upon a triggering event such as default, or an “active” DACA, where the lender maintains ongoing authority. Lenders — particularly those extending revolving credit lines, asset-based loans, or term facilities — typically require a DACA when loan amounts exceed USD 100,000 and the borrower’s deposit accounts serve as a material portion of collateral. Per the Federal Reserve’s 2023 Small Business Credit Survey, approximately 43% of employer firms sought financing of USD 100,000 or more, a tier where DACAs are commonly mandated. The depository bank’s role is to acknowledge the lender’s interest and, when instructed, redirect or freeze funds accordingly.

Different loan types invoke DACAs in different ways. SBA lenders — including SBA 7(a) and SBA 504 program participants — frequently require DACAs as part of their collateral documentation package when business assets and real estate do not fully cover the loan amount. Traditional bank term loans and revolving credit facilities from community banks and credit unions almost universally require DACAs for commercial borrowers with accounts at third-party institutions. Asset-based lenders (ABLs) rely heavily on DACAs to maintain dominion over cash proceeds swept from receivables collections. By contrast, many online alternative lenders substitute daily ACH debits and direct deposit requirements in lieu of formal DACAs, though they achieve a functionally similar level of payment control. CDFIs (Community Development Financial Institutions) may require DACAs for larger loan amounts but often take a more flexible approach for underserved borrowers seeking loans under USD 50,000.

What Business Owners Should Do About a Deposit Account Control Agreement

If your lender requires a DACA, preparation and negotiation are essential. First, review which deposit accounts will be subject to the agreement — operating accounts, payroll accounts, and money market accounts may each be listed separately. Push to negotiate a “springing” DACA rather than an “active” one, so that your lender cannot redirect funds without a formal default notice, preserving your day-to-day cash management flexibility. Gather your depository bank’s DACA template or your lender’s preferred form early, as execution can take two to four weeks due to the need for all three parties to sign. Ensure that payroll and tax-reserve accounts are carved out or excluded, since lenders are often willing to limit control to primary operating accounts. Consult a commercial attorney before signing, particularly if multiple lenders are involved, as conflicting DACAs can create priority disputes under UCC Article 9 that jeopardize your banking relationships.

Understanding your DACA obligations is critical before you commit to any loan structure. We connect you with lenders — we do not lend — which means our role is to match your specific collateral profile, deposit account structure, and loan purpose with the SBA lenders, community banks, CDFIs, and asset-based lenders most likely to offer terms that protect your operating cash flow while satisfying their security requirements. Our network allows us to identify lenders whose DACA requirements are proportionate to your loan size and business stage.