Factoring vs Loadboard Quick Pay

Seems there are several new members showing up on the forum posting about Freight factoring makes me wonder when they're going to offer their services when it's all become spam

 

Quick pay carrier can typically jump on and off as needed
Factoring company likely wants carrier to factor more than here and there

 

Explain to me how it is better than say an unsecured line of credit at 12% for $30,000 per power unit

 

What is difficult about preparing an invoice, scanning proof of delivery, emailing to customer...? Takes me maybe 3 minutes each. And how's it any different from sending the same paperwork to a factoring company?

 

Years back if you needed the cash flow. Factoring had the advantage of accepting electronic images to the brokers for payment.
I had to mail the originals to the brokers to get paid. More time.

Now days most Brokers accept email attachments. One in particular does all business online. Zero phone calls. (It's a little unnerving to me). I like to talk with people I work for.

 

Quickpay fees or factoring are costing you about 24-100% APR, depending on what % they take. I have seen some brokers with QP fees as high as 10%. If standard pay is 30 days, that equates to 120% APR.

Like Scooter said, with friends like that, who needs enemies?

HOWEVER, if you are in a crunch and NEED the cash, it can save your bacon. You just need to know that QP and Factoring should NOT be your long-term options. Better to have the LOC at your bank.

The one person who said if you have more than 1 truck, factoring is critical. OK...perhaps. But, if you have the financial wherewithall to HAVE multiple trucks, presumably, your credit must be pretty good.

Another well-taken point, one that I didn't even consider is, once you factor 1 load with a broker, all loads will be factored until you can get out of the contract.

That is a question to investigate BEFORE signing a contract. You will have to read (and understand) all the fine print.

OR, you can just do like TallJoe, keep a % of your business with someone like CHR, Landstar, Coyote or whomever where they are a known entity. Hopefully with them, you can use QP on the loads you choose. I know with Landstar that is the case, as much as I have grown to dislike doing business with them. Not to start another topic of discussion, but, not all Landstar agents are good, and, lately, I have found that Landstar corporate will not get involved in disputes...they let their agents go rogue. THAT is one of the biggest reasons I don't even consider a load from Landstar...unless it is an agent I know personally, have worked with in the past, have ALL their numbers and can work and speak directly to the agency owner, I won't do business with Landstar.

OK, good thread! Thanks!!!

 

doing invoices/ sending docs is easy , but once you have several drivers , some brokers pay at 30 but some can pay more than 30 , at apex capital you get 3.25% at 30 days , but then you , if you pay drivers in 30 plus days i'm sure you wont have any . some brokers pay a load at 10 days and another load at 30 days , you can't know for sure , a few have regular 10- 15 days , those we factor directly

 

I was able to sustain cash flow with $20K in my biz account when I started standard invoicing. I went down slightly below 10K before I started to deposit payments. For TQL, JB Hunt I choose to QP as their Days to Pay indicator was not very good back then. I remember that DAT showed 50 days for JB Hunt at the time. So if there are more trucks and drivers there needs to be at least...I figure - 15K per truck to allow for a cash flow, correct me if I am too off. Otherwise factoring is necessary. For one truck owner though, factoring is a sign of weakness or a frivolous waste of money IMO. One guy was once here bashing me for daring to deadhead over 700 miles so I chose a few times a year, asking if I was crazy, insinuating I was irresponsible and ignorant, he himself in other posts was saying he factored his invoices as if it was something good and natural. To me, consciously pissing away 6-8K a year is even crazier, no matter what your profits are. To say that office paperwork is a hassle and hard only testifies about someone little ability to do much more beyond being a driver and perhaps a mechanic on his own trucks.

 

Tall Joe...I am not here to disrespect you, but, don't judge someone else's business plan and paint with such broad strokes. Everyone is in a different spot at different times.

This is supposed to be an informational blog. The topic is about factoring companies vs quickpay service. There are owner operators who might either be just starting out, or, haven't even started yet. I sure wish someone was available to give me solid advice back when I was first starting out.

There used to not be broker "quickpay" services, your only choice in the matter was to factor or to wait for your money!

Me personally, if I had to, I'd opt for "quickpay" loads over factoring every day of the week. I'll explain why below, but first.....

While I don't disagree with what you are saying, it isn't always so easy to say if you are one guy with one truck, you should ALWAYS have the capital to sustain 30-60 days of receivables. You insinuate that otherwise, you are a moron who doesn't know what he/she is doing or have no business being an owner op. That is harsh. Starting out in business is tough. Or, coming back to it after having to take time off, such as what I am now doing.

I personally take offense to the insinuations. I am not crazy, and, after 23 years in business, I think I know what I am doing for the most part.

It isn't "crazy" to give up a percentage of revenue to get paid quicker. Sometimes, it is a matter of survival. And, for some people not familiar with it, paper work CAN be a hassle!

Perhaps those who struggle with it shouldn't be operating under their own authority, I'll give you that. But, maybe they haven't found someone trustworthy enough yet to lease on to. Or, they are still learning what is the best way to do it.

We all enter this world the same way, knowing NOTHING. We have to learn, be taught, perhaps repeatedly.

As for being your own mechanic. There are some of us, such as myself, who have no interest. I have done plenty of my own mechanical work in the past, some jobs are simple, while others are a complete pain in the rear. I pay attention to my truck, the sounds and smells it makes, and generally have a good idea what is going on with it by the time I reach my mechanic's door, but, I'd rather PAY someone I trust to climb under it and get a face full of oil, dirt and other fluids than do it myself.

And, if operating like this costs me an extra $10K, $20K or even $30K a year versus doing it myself, I don't really care! I don't own the proper tools, those are expensive. I don't have the proper place to do the work, renting a quality small shop is nearly impossible to find, and expensive! It takes time to be your own mechanic...I'd rather use that time to relax and do what I want or, use it to take care of my paperwork. Finally, I am too old and fat to do physically hard work like being a diesel mechanic. I would much rather not hurt my body, have a heart attack or a stroke trying to fix something my stuff. I need to be able to drive long distances pain free and hang onto my medical card. So, I hope that answers the question about why some people chose to NOT be their own mechanic.

As for why someone might need to speed up their cash flow...

What happens when that one guy with one truck get's hit with a $25K repair bill? Or, get's injured or has a medical condition and can't work for 2, 3 or even 6 months? What if a spouse or child gets sick? Or, he/she has an accident or cargo claim that costs thousands of dollars?

You'd like to think you can cover all the "what if's" life might throw at you, but, simply put, you may not always be able to. Or, if you did, perhaps when you come back, you need to speed up the cash flow to get back to being whole.

It is nice to know that, if you ever need the money faster than 30-60 days, there are options. And, it doesn't have to be from a factoring company. Frankly, factoring sucks. Trying to get out from under one once they have their hooks in you might not be worth it.

But, today, so many brokers offer "quickpay" services, it is possible to start off working exclusively on QP loads, then, ween yourself away to the point you don't have to give up a % to get paid fast. And, there is no UCC filing against your business when you use quickpay like there is when you factor. UCC filings can be tough to remove. Again, more paperwork, more hassle.

But, what if there was no factoring? What if there was no quickpay services?

The alternative might be, you go broke waiting for your money...is that a viable answer? I don't think so.

I know you may not agree with my advice, but, for those who need it, use quickpay services first when you need a faster payout, and be very leary of factoring services. Try to avoid them.

 

OK, but to say that someone is having a weakness, in this case financial vulnerability, is not insinuating that someone is a moron. Especially due to some unfortunate life event. A moron would be someone who does not see that using factoring is best to be avoided. If I could not be paid withing 60 days, I'd most likely use factoring too. If I factored all my invoices only out of whim though, I'd be a moron.

Edit: You're right that I was wrong trying to negate factoring in this thread, as it is rather intended for informational purposes and not some polemic. Therefore, I withdraw myself from here. I never even factored. The only Quick Pays I know are the ones of TQL, JB HUNT, Convoy and Uber. The last three offer them free, provided their phone apps are used.