Factoring Company

The factoring company protects itself by buying credit insurance on each of your customers. It is reimbursed under certain circumstances like bankruptcy and sometimes extended payments, but not if there is a dispute between you and your customer. They pass along to cost of the insurance to the carrier which is why non-recourse is more expensive than recourse factoring. If you are careful about doing business with good companies, you shouldn't need the added cost of credit insurance taken out of EVERY ONE of your invoices, but as G/MAN points out, it's easier to figure out your costs with non-recourse factoring because the fee is always the same. If it were me, I'd choose my customers carefully and not pay for the insurance...margins are skinny enough!

 

That seems more like it. There is NO WAY a factoring company could stay in business if they absorbed the loss for every SHORT or NON-PAYMENT on a factored invoice from a Carrier's Broker or Shipper. That is WAY TOO MUCH RISK.

Unless, the factoring company charged some insanely HIGH rate with very tight restrictions on who they offer non-recourse coverage to.

 

The cost of insurance is a key point. I think if you compare typical rates for recourse versus non-recourse, insurance probably works out to about 1% or so. The problem is that you pay that cost on ALL your invoices and you may only need this protection on a few of them.

The other problem, as you point out, is that the factor may refuse to buy on a non-recourse basis, invoices from customers that have bad credit profiles; this leaves you paying for insurance on customers that don't really need it anyways!

 

With recourse, the factor advances funds on the receivable that they received from you. Most recourse factors that I have looked at have a graduating fee structure. For instance, they could charge 1% fee for every 7 days the invoice is outstanding. Consider that it may take a week for the factor to send the bill and for the shipper or broker to receive the invoice. Since most pay in 30 days, you are already at 5 weeks. It could take up to a week from the time the customer pays the bill until it is received by the factor. Even at 1% per week, you are not at 6% for the cost. With recourse, factors only advance a percentage of the invoice until it is paid. Some also hold a reserve to insure payment. I know some may advance 80% and wait until they have been paid to settle up with you. They pay the difference between the amount paid and the advance less their fee. If the customer fails to pay within a specified time, they will charge the advanced amount back to you and may even take the money from your account if it is direct deposit. Some will charge back an invoice that hasn't been paid within 60 days.

With non recourse factoring, you send the paperwork to the factor and they pay you the entire amount of the invoice less their fee. Unless there is a problem with the shipment, such as damage, that should be the end of it.

I would like to set something up with another factor, but at this point, I would not have much business that I could send them. For the most part, I do business with the same companies and they pay within a very short time, so I don't need to factor those customers.

I am careful with whom I do business. That is why I never had a problem with any chargebacks when I did use a factor. Using a factor can help with your cash flow. But, it can be expensive. Before going with ANY factor, you need to check around and read all the paperwork before signing a contract. Some charge a high fee when you leave them. Others have minimums or a penalty or base fee that they charge. I would not go with any factor that charged a minimum monthly fee.

I would also look at factoring as a means to grow your business and help get you to the point where you can be more self sufficient. You need to ALWAYS make sure that you check credit of anyone with whom you do business.

 

I see one person post about Porter billing and factoring. They are offering non recourse until the end of the month for 3.95%. No month minimums, only factor what you want, get a com data card, prepay only, and only a 30 day contract..... He says if I renew the 3.95 stays until I don't renew. Anyone have and thoughts, reviews........ Thanks

 

I use Thunder Funding and get 2.95% non recourse for first 30 days of payment and 3.95% anything after that. Their transfer fees are very cheap compared to others. Gove them a call and say Emin with Emco Transportation recommended you

 

Thanks!

 

First Line Funding has proven to be the worst company out there. They have no concern for their customer and never have any issues been their fault. It's always the customer's fault. Even though they do not return phone calls and can take up to (2) weeks to return an email. They can take up to ten days (in more than one case four weeks) to email invoices to your customer and then only make collection calls after 65 days. When we sent in our 30 days notice to cancel our contract (as mandated) they immediately cut off our ability to get into our account and see what was happening. Also at that time, they sent out NOA letters to most of our customers who we had not factored. That was deliberate and turned out to be a fiasco. Worst in the business.

 

Do you have an updated review of thunder funding? Im considering giving them a shot