Factoring companies: which are good? What to look out for?

The non-recourse factor typically holds a credit insurance policy that protects against bankruptcy of the company paying the purchased invoices. The cost of the insurance is passed on to the invoice seller, so on an apples-to-apples basis, the non-recourse seller pays a bit more on each factored invoice than he would in a recourse deal. The non-recourse factor has based his fixed rate on the assumption that each invoice will be paid in say 45 days on average...if a payer pays in 55 days, the non-recourse factor will refuse to buy those invoices, but the recourse guy can still do it. So the recourse guy will factor a higher percentage of invoices, but probably at a lower advance on each one. Total amount of funding and cost depends of each situation.

 

Is there a legal requirement for freight factoring companies to buy credit insurance for nonrecourse factoring?

 

I don't think so... I just think they all do it to reduce the consequences of bankruptcy.

 

4% is the percentage rate on the invoice value...you are comparing that to a 3.6% APR rate, which is an apples-to-oranges comparison. trucknut87's company has to pay all expenses (payroll of the collectors, cost of money and credit insurance, etc.) including losses on disputed invoices or losses not covered by credit insurance. I think the perception is that the factor pockets 48%-60% on their money, but that simply isn't true.

 

This is true, it's definitely not a high profit margin once overhead is worked in.

 

I know keyfactor mentioned some, but can you two elaborate on what the other overhead consists of?

 

Yikes ^^...I'll bite my tongue.

 

I love the spammers that pretend to be truckers.

 

I think you have to attend some Math classes. If you have one truck and you collect $20 000 monthly , 5% is only $1000 X 12 months = $12 000. How did you come up with 60% ???[h=1][/h]

 

Don't use em. Pay somebody to give me money that's owed to me? no thanks.