Factoring Companies

You gotta watch D&S. I factored an invoice with them for 875 and the broker must have goofed up and payed them 857 and D&S deducted the difference from the next invoice i factored. That doesnt seem like non recourse. If they charged me for 18 dollars shorted what would they do if they didnt get paid anything? Thats the only trouble ive had with them and its true they dont have a huge contract to read but maybe they should so youd know that they come after you for short payment instead of just pushing the non recourse thing

 

Yes factoring can be a good thing in an emergency but why? If you started your business with an operating capital account you would not be needing to factor any BOL's. You're in this to make money and you count your money at the end of the year not in 30-45 or 60 days. To many O/O's make one mistake and that's not to save or put money back into the operating capital account. I've seen guys take every penny after the truck and blow it on lot lizards, drinking, drugs and other stupid crapola instead of "paying them selves a fair mileage rate" like company drivers and banking the rest. That OC account will cover you on bills and such untill the statements come in. It will also cover you when someone defaults on a payment to you which is why you have the OC account, to cover a low life company.

Next you should be doing a credit check on any new broker you haul for or any company you call for a load (self brokering). If the credit report shows bad payment schedules or that they are slipping towards the red,... RUN AWAY!

But those 5%'s will add up by the end of the year! Surely you can wait those longer payments out. If you don't have a operating capital stash you need to live a bit more frugally, set up a pay scale for you such as 75% of the load and bank the other 25% or more and quit living to high on the hog until you get the account set up. Look at it this way, Put enough in there so incase that truck takes a craploa and is in the shop for a month you'll have your bills paid till your accounts start coming back in. This is just good business and even a trucker should be following it. recession, depression or whatever, it can does and will work!

 

Did D & S repay it or was the linehaul $857? non-recourse means that if the broker doesnt pay, D&S is %100 liable not you, it doesnt have anything to do with clerical errors which it looks like happened in your case.

 

I have used Freight Capital for the past 2 years and they have been great.
I had one company that did not pay me $5,000. When I credit checked them I used thier name not thier MC#. Freight capital realized this mistake but it was too late because my driver was already loaded an on the road. They fronted me the fuel. When it came time to pay the broker was nowhere to be found and the shipper was a snake.
Freight Capital offered me free factoring and took 10% from my loads so I could pay the $ back. They did not have to do this and could have easely ruined my credit. It turned out that the broker eventually paid me and Freight Capital reimbursed me for the $ I paid out.
Anyway, when I book a load I always used the quick pay as a negotiating tool, so I can cover the costs of it.
I realize that it is not good business to lose money factoring, but we ended up having to put over 20K in unexpected trailer and truck repairs and that took a huge chunk out of our savings.
The negative aspects about frieght capital are that if you fedex and wire transfer each load seperately you are charged $15 for the wire transfer and an $12-$15 for the fedex. This can add up very quickly. The program that I am on with them is 3.5% on each invoice they factor.

 

I never liked to use factoring companies that had reserve accounts. I used D and S on several occasions and although the 5% is a little steep they don't hold reserve accounts like a lot of recourse factors do to where they hold an additional 8% of your revenue until the broker pays. However regardless of which factor you use if you factor the majority of your loads you will be paying up to 60% interest just to get paid quickly. If you have good credit a 25k business loan would be MUCH cheaper at 15% or less.

 

Rate was $875, broker paid D&S $857, D&S charged me the difference. That sounds like recourse to me!

 

I just dont understand what you guys are talking about with the 60 percent theory. How does 5 percent add up to 60 percent? Please explain

 

I have had that happen to me several times. Sometimes a broker would short pay on a load for pallets or unloading even though it was in the rate confirmation that they were supposed to be reimbursed by the broker. When that was the case I would end up calling the broker and clear it up to where they would send me the check for whatever they short-paid D and S. Apparently it is nonrecourse unless if it is 20-300.00 short than they sneak in and take it out from your next invoice when they SHOULD BE calling the broker themselves about the shortage. That is why I hated using them or any other factor.

 

Over time if you factor over 100k worth of loads it can add up that high. With a credit card or credit line you can pay it back in 45 days with 0 interest. With factoring they take 5% right upfront. Factoring is a good way to get cash flow starting out if you have less-than-perfect credit and are low on capital. When you become totally dependent on factoring is when it gets really expensive.

 

Here is a different suggestion. Look for a small local bank that does asset lending. Forget the big ones. They just don't do it.
They will lend against your receiveables.
I used such a bank for more than 20 years. it worked out great. I paid 2% above prime on the daily outstanding balance. I needed to provide a monthly aging report. Nothing over 45 days was loanable and after 75 days, it was subtracted from my eligible balance.
So If I had $100,000 in recieveables, 90 of which were 45 days or less, I could borrow up to 75% of that amount. ($67,500). Then if 5,000 was over 75 days, that was deducted. (leaving me with $62,500).
It made me chase old money, but it worked for years.
Check out your local banks and see if they are in this market. Specifically, it's called Asset Lending.