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What is Commercial Escrow?

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  • Written By: Luke Arthur
  • Edited By: A. Joseph
  • Last Modified Date: 19 November 2016
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Commercial escrow is a service that is designed to assist in financial transactions between two businesses. Commercial escrow services allow two companies that are not familiar with each other to work together without any financial issues. These companies will take a payment from one business, make sure that the conditions of the deal have been met and then distribute the payment to the other business.

There are many companies that provide commercial escrow services. One of the most important aspects of the commercial escrow service is that it receives a payment from one of the parties in a business transaction. The escrow company has to be trustworthy in order accept this type of a payment. Many times, the payments are substantial, and the escrow agent is faced with a large amount of responsibility in the transaction.

The next part of the process involves making sure that the conditions of the business agreement have been met. This could include any number of factors, depending on the business arrangement. One common arrangement involves one business winning a bid for a large project. Instead of the business that awarded the contract paying a large sum of money up front, the money could be placed in escrow until the project is completed. The companies involved in the transaction will provide the escrow company with the conditions that have to be met before the money can be distributed.

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The escrow company is then monitors the project. The escrow agent continually checks on the progress of the project to find out when all of the conditions have been met. Until the terms have all been completed, the escrow company is keeps the money. In many cases, the escrow company might be in possession of the money for an extended period of time.

After all of the conditions of the arrangement have been met, the commercial escrow company begins the process of paying the other party. In most cases, the escrow company will have to have someone from the company that made the initial payment sign off on the job. After the escrow company has received authorization, it will process the payment to the other company.

The major benefit of this process is that it is going to allow two unfamiliar companies to do business together. If a commercial escrow company was not available, it would severely limit the number of business options for other companies. With an escrow company, neither party has to worry about the other one living up to expectations.

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