What Is A DACA Account?
A traditional DACA is essentially a safety net for lenders. It's a three-way agreement between a lender, a borrower, and a bank, granting the lender control over the borrower's bank account in case of default or breach of covenant.
There are two main types of DACAs:
- Springing DACA: This type of DACA is activated only when a borrower fails to meet the loan terms, allowing the lender to direct the bank to either freeze or transfer funds from the borrower's account.
- Blocked DACA (BACA): This is a more active agreement where the lender maintains ongoing control and approval over withdrawals from the borrower's account. BACAs are commonly used in warehouse financing situations where receivables are initially deposited into the blocked account and then transferred to the borrower's bank account, either directly by the lender or with the lender's approval.
DACA Acronym
In finance, DACA stands for Deposit Account Control Agreement
DACA (Deposit Account Control Agreement)
A legally binding tri-party agreement between a borrower, lender, and bank that allows the lender to maintain control over funds in the borrower's deposit account. Also known as "control agreements," "account control agreements," or "lockbox agreements," DACAs enable lenders to perfect their security interest in the account and access funds in the event of borrower default.
Springing DACA (Passive DACA)
A type of DACA where the borrower retains full control and access to their deposit account during normal operations. Control "springs" to the lender only when a triggering event occurs, such as loan default, missed payment, or breach of covenant. This arrangement provides borrowers with operational flexibility while offering lenders a safety mechanism that activates only when needed.
Blocked DACA (BACA / Active DACA)
A more restrictive DACA arrangement where the lender maintains ongoing control and approval authority over the borrower's account from the outset. The borrower has limited or no access to account funds without the lender's explicit consent. Commonly used in warehouse financing situations where receivables are initially deposited into the blocked account before being transferred to the borrower's operating account.