Factoring vs Loadboard Quick Pay

Probably at least half offer quick pay. That should be enough for the ones that don't and are slower paying. There really should never be a reason for factoring. Or quick pay, for that matter... just another part of the money management game!

 

Some people like factoring because they'll take care of invoicing and do credit checks. Non recourse means if they don't get paid you're off the hook, so no worries about non payers. That said, I'd never factor. I just wouldn't trust any of them to have their claws on my earnings.

 

You have to be careful with what the non-recourse mean. For instance, The Triumph, factoring associated with DAT load boards, told me, that it means that you are off the hook only in case the payer files for bankruptcy and If it does not, simply delaying/refusing the pay, and the factoring is unable to collect after 80 days or so, they will demand money back. Non recourse does not always mean you are off the hook no matter what. I don't factor and hope to stay this way though it is tempting to have cash the next day.

 

The main, most proclaimed advantage is the billing and invoicing that they do for you. It does make sense to factor if you have more than one truck and unless you have a 50K in cash reserves, you may find yourself in a cash flow hole. The more trucks, the more paperwork, thus billing activity becomes more time consuming and that's when I can see the factoring start to make sense. If it is only "low on cash" situation for 1 truck show, the quick pays should be be enough. Also factoring companies will most likely want you sign a contract with a variety of obscurities; one of them could be the obligation to surrender all of your customers to be factored by them. Quick pays don't. My experience with invoicing is pretty decent. So far I have not had any non-pays, and my days to pay average is 18 days (time from sending/emailing the invoice to the date on the check sent by regular mail) I don't do ACH transactions either, there could be too many obscurities as well. I am kind of meticulous about who I book a load with, check their rating and reviews posted on a loadboard.
However, because they paid fast and firm it does not mean that they always pay good.
The fact the the packet describes that the brokers will pay you in 28 days or 30 days does not mean that they would not pay you faster. For instance, had Bennett International Logistcs paid me in 7 days, Super Service 4 days (best result), American Transport Group in 7 days as well....Even CH Robinson sent me a payment after 7 days on one occasion. It is not that bad wen you wait less than a month to get your money in whole.

 

If your running broker freight I personally would rather do quick pay and most all offer quick pay. You can pick and choose when you want quick pay if you factor a broker you have to factor all loads ran for that broker or call factoring company and have them send a release to the broker that would seem to be a headache to me.usally the quick pay is the same that a factoring company would charge.Now I know some factoring companies and some brokers do also will pay you on a comdata card and offer discounts on fuel when using that card so one would have to figure if that would work for them.now direct customers you would in most cases if you needed your money faster yes you would need a factoring company but as far I know if you factor a company you have to factor all loads from that customer until you have the factoring company send the customer a release.And as someone said earlier about not have to invoice if you use a factoring company as far as I understand you still have to invoice it's just sent to the factoring company

 

Cash flow (especially starting out) can be an issue at times. No one likes to leave money on the table though.

Here's what I did early on. If a broker offered me a load for $1,500 (and I was happy with that rate) and I know their company charges 2% for a 7 day quickpay, I would tell the agent I can do the load for $1,550. That will cover the quickpay advance and will most likely not be a deal breaker.

I have never used an actual factoring company. However, when I first started out I would try to mitigate the cost outlays when it came to using the quickpay feature.

Most of the folks I deal with charge 1.5% to 2% of the gross. Some don't offer quickpay at all, but pay within 14 days and some longer. So overall, by utilizing a mix of payment options, I minimized the actual amount of money I was paying out to keep the cash flowing in I needed for operation.

What's interesting is that some of the brokers I've used for short runs that I take to move me from one location to another pay the slowest.

I recently ran an $800 load for TrafficTech. Never dealt with them before. The agent was nice enough etc. I ran the load and as is customary for me scanned the signed BOL & my INV and sent it to them within 10 minutes after I delivered the load.

I received a check in the mail 39 days later!...

Is it a future deal breaker for me to do business with them? No, not really. I just know now not to expect my money for at least 39 days

Nowadays I usually have 8k to 10k in the business account, so it's not much of an issue. When it is, I just utilize my LOC at 7% APR, which is a heck of lot cheaper than the 24% to 48% APR these factoring and quickpay companies are charging.

 

The reason why I take maybe 40-50% of the loads form CHR is to secure the pay/cash flow. But less and less. I've discovered a few more obscure brokers, who post their loads not so often, but they pay firmly, and those I don't hesitate to call. It takes time to learn who to deal with. For me it is kindof a trial and error method, mitigated by dealing with CHR and XPOs and EPES and the likes. For me so far it has been less then 3 weeks on average to receive the payments in full. So the need to have a cash reserve for at least 1 month or 2 is very valid. But factoring would mean at least 6 grand a year for me, for that I can take my family to a super resort in Dominican Republic on vacation next January for 10 days. I have a feeling that once you factor you will always factor. At times, the temptation to have cash transferred to my bank account the next day is high, though.

 

When I first got my own authority I ran several loads for the same company I had worked for as a company driver and as a short term lease on operator before moving on.

For some reason I needed some cash flow and asked them for a $2,000 advance on a load I had already run and submitted a clean BOL for.

They came back with "sure, we can advance that to you for a 6% fee."

My response was, "who needs enemies, with friends like you."

I never did take the advance...

 

Quickpay is generally significantly more expensive than factoring. My company charges 4% for 2 day quickpay vs cheap factoring for <2% in some of the less customer service oriented places.