anyone using a factoring company

Using factoring companies is a sure way to go broke FAST!
Got to be a special place in hell for those creeps!
Jack
PS...You did well to read, and understand the contract!

 

I hope Jack is wrong about going to Hell because I own a factoring company. Not all have break-up fees, hidden fees, etc. Ask around and find one that's reputable...they're out there. Yes, it can be expensive too...especially if you're paying hidden fees. Ask them to walk you through all the numbers using your typical monthly billings. Ask about same-day funding charges (hopefully there are none, except wire transfer charges). Advance rates (look for something as close to 100% as possible). Recourse or non-recourse (non-recourse is better, but more expensive...recourse is usually good enough if you do business with honest customers).

 

I use APEX. I've encountered no hidden charges or dishonest dealings in a year and a half. They have a nice fuel discount card and fair rates in my opinion. Been with them for 18 months and haven't gone broke yet. The fuel discounts basically pay for the cost associated with factoring for me.

 

I use Truckers Bookkeeping Service. They helped us get our own authority and are very trucker friendly. I get paid from them in two days and they have been in business almost 40 years. You can go to www.tbsfactoring.com.

 

I have worked for a couple different factoring companies. They can be of great benefit as long as you chose the right one. Some are blood hounds for sure.

 

How about Freight Capital, has anyone used them ???

 

Freight Capital, bad news. I can tell you the good ones, but I don't want to get into trouble and get thrown off of here for "advertising." You can call me if you would like and I can tell you the good ones and the bad ones. Phone numbers deleted I am not working for anyone, I can simply tell you the best places to go to for factoring, or insurance, or brokers, I know a lot of good people.

 

Yes. We've been using them since we started out two years ago. At the moment, I am very satisfied with their service.

The forum search is your friend on this topic, usually about a thread or two per month. Here's a few shopping tips:

• Read the agreements carefully. Some will be extended. That is, you may get a generic "overview" sent to you that contains a link to a much longer version in Legaleze that will constipate your brain.
• Agreements should read more like a credit card agreement than a timeshare contract. Warning flags should pop up if you see the term "unlimited" along with "power of attorney." Some agreements include minimums, as in you must factor at least some amount of receivables. Another issue is how much access you are granting to your business records. If it's still confusing, get legal counsel.
• Watch for language that tries to own all your receivables. I made this a separate item on purpose. When you factor an account, you will at least be having to factor all invoices for that particular customer due to regulatory filings related to the assignment. That part is normal and expected. If the prospective factor has anything other than a customer-by-customer expectation, look hard at it. It will probably be bad for you.
• Expect a mess if you decide to "divorce" your factoring company. Even if your factor is totally legit. At a minimum, all accounts will have to be paid in full before they will release the assignment. It's like clearing a lien on a title. Except it's your customers. This is a risk that could put all or part of your business in limbo for some time.
• Re-read the terms about what happens on a claim. Then read them again and ask questions. The sketchy factoring companies will freeze your account at the drop of a hat. Another huge risk, depending on how much of your business is factored.

A lot of negative stuff there for good reason. Here are a few less stressful things to consider

• Understand what factoring is, and what your role/responsibility is in the transaction. It is a loan against your receivable. You are still where the buck stops when it comes to account settlement. From the start when you send in an invoice package for funding until the factoring company collects. It's still your customer and you are the only one with the unique knowledge of what happens on each load in the event a customer decides to not pay their bill.
• Consider the value proposition versus individual elements of the deal. In this regard, it's a lot like deciding if a carrier lease offer is good or not. Don't just focus on the factoring percentage clip is high or low, as that is just a spoke in the wheel. Measure that along with other things like fees (overnight delivery, handling, transaction fees, fuel, tire, service, or other discounts, etc), turnaround time on funding, paper or electronic submittals, along with extended services they may offer (reporting, collection, invoicing, and so on). Choose the one that fits your comfort level and business. What may work for you isn't going to be a match for everyone.
• A factoring company is not a dump for high risk accounts. They like getting paid just like you do. They will usually have a credit check tool that is a pre-requisite for funding. That is, they will often not accept customers that are too risky in the first place. Never forget that factoring a customer does not absolve your responsibility and wasted time with having to deal with unscrewing a mess or ultimately collecting a debt that a bad customer is jamming up with bogus claims.
• When some customers see the factoring assignment, their pay cycle slows down. A natural, since they know that it's not you, the carrier, being directly impacted by a few extra days to pay. For this reason, you will really need to monitor your receivable aging and get involved at least two weeks before you risk a charge-back, usually at the 45 day mark.
• Days to pay will count up differently between the factoring company and your customer. Not necessarily an issue, but you need to be aware. Factoring companies will start the clock when they fund you or on the date of your invoice. Customers start the clock when they receive the invoice package. If the factoring company takes a few days to process then sends via US Mail, you can easily see a week of business days being added to that aging difference.

I hope that helps and good luck on your search.

 

Red is extremely knowledgeable about factoring and I would agree with nearly everything he says, although my perspective is a bit different from his. I would argue that many of the issues he points out as being things to watch out for, while absolutely true, are necessary for factors not because we're trying to screw you, but because we need to protect ourselves against fraud and non-payment. We don't choose your customers, so when we buy your invoices on a recourse basis we will not accept the risk of non-payment for any reason. I also view the comment above a bit differently than he does...the "mess" he refers to is similar in my eyes to a mortgage on your house in that although you still own the house (or customer in the case of factoring), you must pay back all outstanding amounts on the mortgage (or factoring facility), should you decide to terminate the agreement for any reason. That said, his advice holds true...do your homework and get referrals. Any agreement can be scary to read, but the referrals will usually tell you the real story about how it is to work with them. A bit like hiring a contractor to work on your house...lots of horror stories out there, but that doesn't mean there aren't legit guys out there and I wouldn't blame these guys for trying to protect themselves just as factors should protect themselves.

Good luck to you, RHay. I'm sure you'll find a good company to do business with.