question about brokered loads

i've used them for about 6 months so far,on all my loads, they charge me 5% to get my money and they seem reliable,, I don't have to deal with any unpaid loads,, so at a loss of 5% of my gross is better to me than a loss of 100% + my fuel expense if the broker doesn't pay,,, plus I'm not waiting 30 days + to get my money from legit brokers.I also use them for my comdata cards, which is convenient for me.

There are several other factoring companies out there,, I hear that Advantage only charges 4% and that it goes down over a period of time,, looking into them now.

 

Wow...5% seems high to me. Not sure about other company's quick pay programs but I'm pretty sure ours is only 2% with payment gauranteed in 48 hours. Any of you guys use it that could confirm/deny this?

 

Never do quickpay, thought the cut was 1.5%, but have seen payment as quickly as 9 days from some of the better LS agencies. CH Robinson has paid full amount in 6 days once.

 

I saw factoring mentioned here. What is it exactly?

 

It's the devil...

No, in all seriousness it's a third party company that handles your accounts receivables in return for a portion of the profit as notated above. The larger companies don't do factoring, but instead do quick pay. I've heard several horror stories from folks who dealt with factoring companies. Still, I've heard people say they have no issues and several who use them. Unless you have the capital to wait up to 45-days for your money, you generally will need to sign a contract with a factoring company to keep your own business with your own authority afloat.

 

Ahh, I see. So you get your load through the factoring company, or you get your load and process it through the factoring company. Then you are guaranteed prompt payment from the factoring company within a certain amount of time after delivery. The the factoring company charges a fee for this, then they bill the broker.

Sounds like it could be useful, but a knowledgeable, experienced driver wouldn't need this once they build a client base with reliable brokers and shipping companies. In fact for a new owner this could actually hinder the process of building a good client base as you have no interaction with them on the billing side.

Edit: do brokers ever prepay say for part of the load, say estimated fuel cost, then pay the balance on delivery confirmation? I'm guessing the door swings both ways with new brokers as well as new carriers. A new carrier may have to prove himself by taking slightly lower rates, and a new broker may have to put a 'deposit' down on a load so the driver feels comfortable they will be paid on delivery?

 

I was stiffed twice in ten years. I took one broker to small claims court and won by default since he didn't show up on the court date. He was stupid enough to list himself under his home address as his own process agent, so it was easy to collect the full amount plus interest w/ legal fees added.

The second guy was acting as a "third party" for a shipper. Never could run him down. The load seemed a bit fishy from the get go, but I was anxious to get moving. Lesson learned.

 

Well, that's a very simple version of how it works.

First off the broker's credit has to be approved by the factoring company first and foremost. No approval, no payment. Secondly, is the factor doing recourse or non-recourse factoring. Non-recourse means the factor accepts ALL the payment liability, recourse means they accept payment liabaility UNTIL a specific term (90 days) is met and then they dump it back in your lap AND deduct what they paid you from your next settlement.

 

Yes Sir. I am a new broker (or shall I say my business is new) and, in order to establish terms with a carrier (as well as some trust!) I have prepaid a portion (and in one case, the total,-excluding unforeseen demurrage, etc). It's not ideal, but the Shipper is one of my best and well-qualified, as I had confidence that it was worth any risk. So far so good.

 

D & S is 5% as well. I find that steep, so will share the hit with the carrier if QP is required.

What kills me is wire fees. As I had mentioned, I have prepaid a few carriers--typically via wire transfer. $30 in total if it isn't a corresponding bank. Yeouch.