Cash Dominion
Definition
Cash dominion is a control mechanism under which a borrower's incoming receipts are routed first to the lender, so collections are applied to the facility before the borrower can use the funds. It is a standard feature of asset-based lending and works through a controlled or blocked account into which customer payments are swept. The lender uses those receipts to pay down the outstanding balance, and fresh availability is then made available against the borrowing base. The purpose is to keep the lender's exposure tied closely to the collateral: because receivables and other assets turn over, cash dominion ensures the lender captures the proceeds of that collateral rather than allowing it to be dissipated. In its strongest form, dominion is continuous and all receipts pass through the lender's control; in a springing form it activates only on a trigger such as a covenant breach, a default, or availability falling below an agreed threshold. This matters to borrowers because cash dominion affects day-to-day liquidity and working-capital rhythm, and its terms warrant close attention. For IP-backed lending the concept is particularly relevant where the loan is serviced from the revenue or royalties the intellectual property underpins, since licensed IP with attributable royalty income is a preferred lender collateral. Where a borrower's repayment depends on income streams tied to its IP, a lender may want visibility and control over the accounts through which that royalty or licence income flows, mirroring receivables dominion. A UK company borrowing against an IP portfolio should therefore expect the facility to specify how and when cash dominion applies, and should model the effect on liquidity, because operating cash flow remains the primary repayment source and dominion determines when and how that cash is captured. Advisers should confirm whether dominion is continuous or springing, and negotiate the trigger and mechanics before signing.
Complementary Terms
Concepts that frequently appear alongside Cash Dominion in practice.
The borrowing base is the amount a lender will make available against a borrower's collateral, calculated as eligible collateral multiplied by its advance rate, less ineligibles and reserves. It is the central mechanic of asset-based lending: rather than fixing a loan amount up front, the facility flexes with the value of the underlying assets, so availability rises and falls as receivables, inventory and other collateral change.
Royalty income lending is a financing structure in which a loan is advanced against, and serviced from, the licence royalties that an intellectual property asset generates. Royalty income lending is widely regarded as the cleanest form of IP-backed credit because it aligns repayment with a contractually defined, recurring cash stream rather than with the uncertain resale value of the underlying right.
Revenue attributable to IP is the portion of a business's income that can be reasonably traced to a specific intellectual property asset rather than to the enterprise as a whole. Isolating revenue attributable to ip is central to both valuation and lending, because it demonstrates that the intangible is a genuine, separable driver of cash generation rather than an inseparable part of goodwill.
A violation of a financial or operational condition specified in a loan agreement, which may trigger a range of lender remedies including increased interest rates, acceleration of repayment, additional collateral requirements, or declaration of an event of default. Financial covenant breaches most commonly involve failure to maintain minimum debt service coverage ratios, maximum leverage ratios, or minimum net worth requirements.
Debt serviceability is a lender's assessment of whether a borrower's operating cash flow can meet the principal and interest payments on a loan as they fall due. In IP-backed lending, debt serviceability matters because collateral is only ever the secondary, fallback repayment source; the primary source is the cash the business generates from trading.
An overadvance is a drawing that exceeds the amount the borrowing base would normally support, so the borrower is advanced more than the eligible collateral, at applicable advance rates and net of ineligibles and reserves, would justify. In asset-based lending, availability is calculated from the collateral, and an overadvance temporarily breaks that link.
Collateral ineligibles are items a lender excludes from the borrowing base because they fail its eligibility criteria, so they generate no borrowing availability. In an asset-based facility, availability is calculated by applying an advance rate to eligible collateral, then deducting collateral ineligibles and any reserves.
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