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What is the Difference Between Accounts Receivable Financing & Factoring?

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What is the Difference Between Accounts Receivable Financing & Factoring?

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Many business owners equate accounts receivable financing with factoring. However, there are numerous significant differences. Factoring is the discounted sale of accounts receivable. With factoring, the factor purchases each invoice that is sent to a customer. Factoring can be costly. In contrast, in the typical asset-based lending and/or accounts receivable financing arrangement, the lender advances a percentage of each qualified invoice amount that is assigned to the lender. In this form of financing, the business owner maintains some control of its accounts receivable and its customers. Gateway works with its borrowers to assure that collections efforts are accomplished. A Gateway Line of Credit is superior to factoring in that borrowers have considerably more flexibility in what invoices they assign, how notification is handled, substantial cost savings, and many other advantages. And Gateway is one of the premier, most experienced, and professional asset-based lenders in the West

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