Gateway Line of Credit v. Factoring

cash with mouse If a company uses accounts receivable (A/R) financing with a bank rather than an independent financing company, they will have to abide by much stricter guidelines, and restrictions. A/R financing with Gateway provides borrowers with significant additional flexibility, extremely competitive rates, and the knowledge of working with a company that has been making commercial loans for 30 years.

Factoring and accounts receivable financing are similar commercial financing methods. While factoring companies charge a fee based on the gross invoice amount, a Gateway commercial loan, secured by the assignment of the borrower's A/R, charges interest only on the net amount borrowed. This makes a Gateway Line of Credit more cost-effective. Further, Gateway does not charge any additional (hidden) fees, such as an Assignment Fee, Termination Fee, Annual Renewal Fee, etc, like many Factoring companies do.

The following is an example of the savings realized when comparing a Gateway Line of Credit with Traditional Factoring:

Gateway Line of Credit Factored Invoices
Invoice Amount $350,000 $350,000
Monthly Fee 2%* 2%
Advance 80%** 80%
Total Cost $5,600 $7,000

In the above example, a borrower using a factoring firm to finance their accounts receivable would be paying $1,400.00 more in fees each month. This is because, with factoring, the fee is charged on the face amount of the invoice ($350,000), writing check rather than the amount of money that is borrowed ($280,000), as is done with a Gateway Line of Credit. And this is assuming that the borrower can even find a factor that is willing to purchase its A/R for the same rate as a Gateway Line of Credit. The reality is that the rates charged by factors are often significantly higher than the rates charged by Gateway.

Since Gateway is an accounts receivable lender and not a factoring firm, we can, in most cases, save you money if you are currently factoring your invoices. Please Contact Us for a no-obligation quote to see how Gateway can provide your company with quality loan products at highly competitive rates.

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* The monthly fee may vary from company to company, Gateway's actual rates are based on numerous aspects of the borrowing company, including, but not limited to, the size of the Line of Credit, the overall collateral pledged by the borrower, the financial condition of the borrower, the quality of the A/R being assigned, etc.

** This percentage of money advanced is different from business to business, and will be negotiated with your individual loan officer.