Bulk Sales Escrow

DEFINITION of 'Bulk Sales Escrow'

A type of escrow agreement placed on the sale of inventory, business assets or an entire company. The escrow serves to protect the interests of unsecured creditors: it eliminates the risk that the seller of the assets will use the proceeds from the sale for purposes other than paying debts or taxes owed.

BREAKING DOWN 'Bulk Sales Escrow'

A company experiencing financial difficulty can ease its problems by downsizing its business and selling off portions of its inventory or business assets. To ensure the proceeds from these liquidations aren't lost in further unprofitable business operations, an escrow agent receives the funds from the seller, holds them until the transfer of the assets and then forwards the funds to the appropriate parties. Escrow fees are charged for this service and are usually shared by the buyer and the seller, but the escrow agreement can specify any fee payment arrangement agreed to by the parties.

RELATED TERMS
  1. Secured Debt

    Debt backed or secured by collateral to reduce the risk associated ...
  2. Unsecured Creditor

    An individual or institution that lends money without obtaining ...
  3. Inventory

    The raw materials, work-in-process goods and completely finished ...
  4. Closing Costs

    The expenses, over and above the price of the property that buyers ...
  5. Escrow

    A financial instrument held by a third party on behalf of the ...
  6. Escrow Agreement

    A legal documents that outlines the terms and conditions between ...
Related Articles
  1. Markets

    How To Calculate A Z-Score

    Investors need to know how to detect signs of looming bankruptcy. The Z-score can help.
  2. Fundamental Analysis

    Inventory Valuation For Investors: FIFO And LIFO

    We go over these methods of calculating this component of the balance sheet, and how the choice affects the bottom line.
  3. Bonds & Fixed Income

    An Overview Of Corporate Bankruptcy

    If a company files for bankruptcy, stockholders have the most to lose. Find out why.
  4. Term

    The History and Purpose of TQM

    Total quality management explores processes to enhance quality and productivity.
  5. Term

    What's an Incumbency Certificate?

    An incumbency certificate lists an organization’s incumbent directors and officers.
  6. Options & Futures

    An Introduction To Swaps

    Learn how these derivatives work and how companies can benefit from them.
  7. Active Trading

    What Drives The Price Of Gold?

    Gold prices are based on the economy and actual uses, but there are many other factors that dictate gold's perceived value.
  8. Investing Basics

    Financial Boiler Rooms Today: Real-World Examples

    High-pressure sales environments pitching inflated penny stocks or faux companies exist and cost investors millions every year. Here are a few examples.
  9. Economics

    What's a Memorandum Of Understanding?

    A memorandum of understanding, or an MOU, is a written legal agreement.
  10. Economics

    Explaining Incorporation

    Incorporation is the process of legally becoming an entity that is separate from its owners.
RELATED FAQS
  1. What is a derivative?

    A derivative is a contract between two or more parties whose value is based on an agreed-upon underlying financial asset, ... Read Full Answer >>
  2. Do working capital funds expire?

    While working capital funds do not expire, the working capital figure does change over time. This is because it is calculated ... Read Full Answer >>
  3. Does working capital include inventory?

    A company's working capital includes inventory, and increases in inventory make working capital increase. Working capital ... Read Full Answer >>
  4. How does a forward contract differ from a call option? (AAPL)

    Forward contracts and call options are different financial instruments that allow two parties to purchase or sell assets ... Read Full Answer >>
  5. Over what time period should I be looking at the forward rate?

    Your target time horizon for forward rates depend on your own investment horizon. If you have a specific forward contract, ... Read Full Answer >>
  6. What kinds of derivatives are types of forward commitments?

    A derivative is a type of security in which the price of the security is dependent on underlying assets. A derivative could ... Read Full Answer >>
Hot Definitions
  1. Black Swan

    An event or occurrence that deviates beyond what is normally expected of a situation and that would be extremely difficult ...
  2. Inverted Yield Curve

    An interest rate environment in which long-term debt instruments have a lower yield than short-term debt instruments of the ...
  3. Socially Responsible Investment - SRI

    An investment that is considered socially responsible because of the nature of the business the company conducts. Common ...
  4. Presidential Election Cycle (Theory)

    A theory developed by Yale Hirsch that states that U.S. stock markets are weakest in the year following the election of a ...
  5. Super Bowl Indicator

    An indicator based on the belief that a Super Bowl win for a team from the old AFL (AFC division) foretells a decline in ...
Trading Center