Cash collateral: why a bank balance is not a spending budget

Identify whose interests follow the cash

A company may have money in its operating account and still need permission to spend it. Section 363 defines cash collateral to include cash and specified equivalents in which the estate and another entity have an interest. Collections from pledged receivables or rents from secured property can therefore require a separate analysis. The account name alone does not resolve that question.

Start with a map of accounts, receivables, deposit agreements, and asserted liens. Distinguish the existence of a lender's claim from the scope and validity of its security interest. Those are legal questions supported by documents, rather than assumptions to build into a spreadsheet.

Read the authority alongside the budget

Under section 363(c)(2), cash collateral generally may be used with the consent of each interested entity or with court authorization after notice and a hearing. Adequate protection can become part of that authorization. A proposed budget attached to a motion is not itself an entered order.

For an illustrative manufacturer, a forecast might show receipts sufficient for payroll while the proposed order permits only specified expenses. The finance team should compare each payment category with the actual order, including reporting duties, permitted variances, and termination provisions. These details are case-specific.

Make the forecast explainable

A useful forecast distinguishes expected receipts from available cash, identifies when payroll and taxes fall due, and records the assumptions behind major collections. Compare actual results with the approved budget promptly. A missed collection should be visible before it becomes an unauthorized payment or an avoidable service interruption.

Questions for the cash-collateral discussion

• Which receipts are alleged to be collateral, and what documents support that position?
• Does the operative order authorize this payment and this amount?
• Who tracks reporting deadlines, variances, and requests for further consent?
• What happens if projected receipts arrive later than expected?