Is Accounts Receivable Financing a Type of Loan?
Yes. In the typical accounts receivable financing arrangement (a form of asset-based lending), a business assigns its invoices to its lender, and the lender uses the assigned A/R as the collateral for one or more loans. (In contrast, in the traditional factoring scenario, the factor buys the accounts and, therefore, the factoring transaction is actually a purchase rather than a loan.) Gateway is an asset-based lender that specializes in accounts receivable loans. Typically, Gateway enters into a contact with a borrower, whereby the borrower assigns to Gateway its accounts receivables, which creates “availability” or available funds that the borrower can request. The borrower can take all of its “availability” or it can take nothing at all. The borrower can have Gateway deposit a check into its checking account (at qualified financial institutions), we can wire and/or ACH the funds, or the borrower can come in and physically pick up a check. When the collections from the assigned accoun
