BLACKLISTED

Well you might want to take that math curse too.
If the terms are NET30, then it it the functional equivalent of 36%APR. If it's a NET90, it's the same as an APR of 12%, which is still huge.

 

If it walks like a duck and quacks like a duck, it's a duck. On a 3% discounted invoice fee, that you sold to a factor that is payable net 30 is the same as a 30-day loan and it is equal to paying an interest rate 36% APR.

So, let's say you generate $50k per month to your truck. You sell all of your invoices that are payable to you at net 30 (Assuming you know what a payable in net 30 invoice is) at a 3% discount. You will receive $48,500 for the $50,000 in invoices from a factor co. Therefor, you are giving up $1,500 that will go to a factor when they collect from the Shippers/Brokers the full $50,000 from the invoices. YOU DO THIS EVERY MONTH YOU PAY (or you are giving up on collecting on) $18,000. PER YEAR. Ready because here is the FUN PART- for the Factoring Co., $18,000 divided by $50,000 is equal to 36%. Yep, they are earning 36% on money that cost them about 5%-6% a year.

Now here is a little Fun Fact- Brokers have to have a Performance Bond to be in business. This is what happens if they go titsup and don't pay, you may have to wait to post against their Bonding Company that will take far longer than 30 days, but you will get your money. And believe me no Freight Broker will ever want you to file against their bond because they pay a fee for that Bond, and it will go up in astronomical rates if they ever pay a clime. Oh, and if the Freight Broker files Chapter 11 Guess who is first in line with the creditors to get paid - the Bond Company.

This is not about MATH it is about FINANCE.

 

Maybe he should take his own advice.

 

Good post, if a broker goes belly up though won't that bond of 75k or 100k be used up very quickly so you probably won't get paid as a carrier? I was under the impression that the bond was far more useful in cases where the broker is still doing business but decides not to pay you for whatever reason?

 

Indeed. There's even a few brokers I deal with via TriumphPay that quick pay as low as 1.5 percent now. Even the average of 3 percent is way better than any factoring scam. Not to mention, QP is no strings attached. You're simply giving a discount for early invoice payment. Easy!

 

Neither will the Carrier. The factoring company will take back the money they loaned to you in the event of bankruptcy. No such thing as "non-recourse" it's all in the fine print of their BS contracts.

 

I loved the old 2-10 net 30 Invoices that was the fasted check I would write to get the 2% discount by paying in just 10 days.

 

Were the payment terms NET30? Did you start collection efforts at day 31?