Dodged a bullet

You have to view factoring as just a credit line, extended to you, that includes minimal collection and accounting service. Regardless of their promises, you're still responsible for the invoice from start to finish. You still have to manage your business relationship with your customers. That includes checking in at random with your best customers to make sure the factoring company is doing their collections in a prompt fashion and behaving like professionals behind your back. It also includes occasionally having to call them and ask why they short paid or haven't paid, or resolve errors in the paperwork.

The factoring dilemma I described would have been no different than me mailing an invoice on net-30 terms. Except that instead of getting screwed directly by the customer and ending there, it would also reflect negatively on my record with the factor regarding what kind of risks I take with new customers. With the added benefit of not knowing until I got a 45-day alert to look into it, assuming I hadn't already gotten some other warning signs from the customer as their business started to unwind. Like it or not, you're taking a risk with any new customer whether you're factoring them or not. In this example, I considered all the information I had on hand and decided to extend $4,000 of credit to this new customer. My strategy paid off, but it was a close call. I had no way to predict, nor any indication that they might close their doors 45 days after I invoiced them. Who knows? They might have still paid. Or not. I don't know any other carriers doing business with them so will never know.

I won't say Freight Capital is the best one out there, but their program works for me. I had a couple of issues early on, due to my expectations that were set too high from their marketing BS. Once I had a better grasp of how everything was supposed to work, it's been trouble-free ever since. The fuel discount I get on their fuel card entirely offsets processing fees plus about 1-1.5% of the factoring charge. The rest of the charge is of a fair value to me in terms of extended credit and administrative support. Most importantly to me, their processing is on a very predictable timeline.

I'm sure BBB will be along shortly, as he had a bad experience with Freight Capital. Hear him out or search out his experience he's already posted. Their program isn't a perfect fit for everyone, and not everyone will get the same value from their offer as I do. Plenty of good choices out on the market.

I'd say the number one warning sign I got when shopping last year were from companies that either included a power of attorney, or some sort of pledge of personal assets as security against the debt. That's nonsense. The debt is secured by the asset (your account receivable) and backed by your business. The security agreement should be no more troublesome than a bank card. If it is, I'd be suspicious.

 

Their discounted price is usually 10-20¢ below cash price. Of course they hype it up a little by their discount sheet listing the net off of posted pump prices. The actual discount varies from one place to another, even in the same vicinity. No doubt due to tax variations and location markups. Of course the catch is that you can only fund it with factored invoices. So the salesman will tell you "look at all the money we'll save you on fuel purchases!" And you should consider the big picture and figure "here's a way to knock down the cost of my services, and nothing more." You'll never get ahead on the fuel card by itself. It only adds value to the whole deal, which will cost something no matter what.

It's a Comdata card so you get at least the cash price, even when filling off-network for no discount. When you fuel, the cash price and amount is what prints on your fuel invoice. The discount is actually a rebate that comes off the transaction on the back end. You have to log into Comdata to see what the exact amount is, or figure it out by subtracting the transaction from your invoice. They recently started sending a daily card summary by email so you can monitor or separately record those amounts without hassling with the web interface. Transaction fee is $1.50, with a few exceptions. Just like the fuel discount, it's a cost you have to be smart about, manage, and apply to the over all program. If you're not careful, those $1.50 charges will add up. For example, I'll deposit a large Comchek into my bank account and use my debit card for several small purchases, versus getting hit for $1.50 a swipe using the fuel card. Another good one: One time I fueled at a Petro, I had left a side marker light with the cashier to stack on the transaction. When I closed the invoice, the cashier forgot to include it. I paid separate with my debit card to avoid another $1.50 transaction.

 

True, if you're comparing it to only a line of credit. What I'm also getting is a fair amount of administrative support with the fuel card and collections. My cost of factoring last year was less than I'd have had to pay a part timer 20 hours a week to do all that for me, or do it myself. Still more expensive than waiting for checks to come in the mail, but that's the same reason I pay a shop to do PM and repair work I could do myself. Being capable of doing everything doesn't always justify it being the most valuable use of my time.

 

One factoring company (it wasn't one named frequently in this forum, no surprise) I was considering had me very close to signing up. Their offer was everything I wanted and competitively priced. However, their agreement included an unlimited power of attorney, basically enabling them to take title to everything I owned without even having to notify me. Yikes!

The sales guy was a total pro and was just not able to address that. So he put his manager (the "closer") on the line to see if we could work it out. When I dared question the POA, the guy flew off the handle. It went from him accusing me of being dishonest before the fact, and degraded to the point he was screaming all sorts of filth right before I hung up on him.

Read the fine print, don't be afraid to make them answer to it, and run away if it even makes you a little uncomfortable.