Getting started as OO, should I factor?

Yes.. But if you could just see how cool the new chicken lights look at night ... You would know it was all worth it. Roll the dice!!

 

I guess you could also look at it as a bank loan of 36,000 at 5%, with the difference you have all the money right at the start rather than being metered out 3,000 every month ...

 

iv always thought factoring to be a rip off. i do plenty of stuff that is net 60 sometimes 90 days. most is net 30. it can be tough to swallow esp when you get a big run of stuff that is slower paying but when it comes in and you have some quicker paying stuff coming in at the same time it all balances out and your a lot of money ahead at the end of the year.

as far as non payment iv had very little iv had a couple get way drawn out (worst one ever took 6 months to get paid) but it was only a small % of my total revenue and they got black listed by me. but i have probably only ever had a total of less than a grand that i was never able to collect on.

 

Best way to factor is to use a factoring company for a small amount of loads. Once they ride your coat tails for $3,000 you cut it off. At the end of the year you dive into the grey area with your accountant and divide up the $3,000 into charitable donations and business promotion services, etc. Use their earnings as a tax write off for yourself. Sometimes you can even inflate that number by 3-4 times. This way the percentage of unearned money they take from you can save you 10-12,000$. At the end of the year when you run the hard accurate numbers your actually making money to factor some of your loads. You can earn up to 3% in revenue by factoring. That sounds like a much better deal then giving away 5% of your hard earned money.

 

Factoring companies are really fast becoming pointless most of the brokers offer a quickpay option that is the same or less then the factoring companies
For my direct customers I offer them a discount if they pay within a certain time window
Also factoring companies know this and like any other transaction there percentage is subject to bargaining best offer I have got is 1.25 % to factor but they wanted all my invoices

 

2fuzy is correct, factoring companies have been lowering their rates in order to try to stay competitive with the quick pay option. I have never been a fan of factoring. It's sharking at its finest.

 

I agree factoring is expensive. I do it for the cash flow. I usually submit 50% of my invoices a month to factor, recourse that costs about 3%. I am slowly getting back to high ground and am able to get short term notes (30-45 days) from my bank. $5000 for a month cost $56 dollars. $5000 factored for 30 days $157. Much cheaper to do the bank notes. My bank doesn't have the same open hours that I am around.
Factoring is nice because they do the collections. Saving me time to drive.
If used as a tool and not a life preserver, factoring can help.
Factoring can also slowly suck the profit from your business. Good luck.

 

If you are still looking at factors, check around with several factors and find one that best suites your business model. Rates and terms can vary considerably with different factors.