Collection account

BY MICHAEL SHANG · SIXTEEN YEARS IN COMMERCIAL BANKING · UPDATED 2026-11-01

// THE SHORT ANSWER

A collection account — or trust account — is the account a financed business's customers pay into, held so that receipts reduce the lender's advance before the business can spend them. It is how a receivables or trade financier stays in control of the cash its collateral turns into. Its weakness is the client's own conduct: under confidential invoice discounting the client collects its own ledger, and receipts that stray from the trust account are usually the first sign that the arrangement is failing.

BASIS  Practitioner judgment from sixteen years in commercial banking, set out in How Bankers Think (Highbank Press, 2026). Every borrower on this site is a composite constructed for teaching, not a client. The market is mid-market commercial lending as practised in New Zealand and Australia; where a convention differs elsewhere, the page says so.