Factoring vs Loadboard Quick Pay

Tall Joe, nice rebound! I appreciate your sentiment here.

I agree with you, we all have financial stress from time to time, and, if someone doesn't, they should consider themselves very fortunate. But, if someone does, it doesn't make them a moron.

However, I would agree too...it would be moronic to factor on a whim. It is serious business. Factoring companies want nothing more than to get their hooks into a company...it is very difficult to divorce yourself from one. Take it from me. I tried once...no bueno.

Lots of brokers today offer quickpay services. Some charge more than others, so, you have to be careful what you get into.

As a matter of habit, I always ask for more on the rate than what is being offered...and, when I think I am at top dollar, I ask in addition for the extra $ it costs to get their quickpay. I might not always get that, but, at least I am getting more than what I would have had I not negotiated. So, lesson to those out there, someone offers you a rate, always ask for more. Also, someone asks YOU to quote them a rate, tell them a higher # than what you think it is going for, and leave the door open for negotiation. I try to pay a bit dumb, typically say something to the broker like "Gee, I have no clue what this lane typically goes for...you must run this one alot, what have you been seeing it go for?" It's called, "turning the tables" in a negotiation. But, there again, this is another topic of discussion, I'll leave for another time.

And, yes, I have noticed some brokers offer quickpay for "free" if you use their tracking apps, which usually are no big deal...I have noticed some "forget" to turn it off, so, I end up having to kill the app myself after I am unloaded, but, so what.

Tall Joe, I realize you don't use these services, but, if you had to, it sounds to me like you would be leaning towards using quickpay services and NOT factoring. I feel the same way.

However, with that said, there is a factoring company that recently got "in bed" with DAT called Triumph...I don't know much about them, not sure how long they have been around, if they used to be called something else, or what. However, they seem to have a pretty good offer...you can factor just the loads you want. They pay out on a card that can be used for fuel that gives a pretty good discount (I don't recall how much) off the cash price. You can go month to month with their service or sign a longer term contact for a better rate. But, it appears that they will only factor for certain brokers, not all.

Of course, the question boils down to the UCC filing...I haven't signed up with them, but my guess is, they are going to do one. When you end your contract with them, who is going to see to it that the UCC is removed? From what I read, it is up to the factoring company to "release" their "lean" on your company. For me, that is problematic.

It sounds good on paper, but, it doesn't seem like it as as simple to "pick and choose" who and when you want to factor as Triumph makes it sound. In order to factor in the first place, you have to tell your broker that you factor with whomever you do. Therefore, invoice for your loads now comes from the factoring company, not you. When you decide to change that, no longer factor those loads, how much work is involved in changing that?

Again, in thinking about all these possible scenarios, I lean towards using quickpay services instead of factoring.

Yes, perhaps with factoring, you alleviate some paperwork, and you get your money quicker. But, you add a layer between yourself and your broker that you might not want to have. I have heard of trucking companies getting burned on factoring because, the broker stopped paying their bills, the factoring company doesn't SAY anything to the trucking company, just lets you keep on taking more loads, before you know it, 3 or 4 months have gone by and you have thousands of dollars in AR that, you have been paid for, but, the factor hasn't. The factor ups your rates on loads, now, rather than paying 3 or 4%, your paying 15 or 20% and, you owe thousands to the factoring company. Again, no bueno.

Yes, brokers are supposed to have bonds which are their ultimately to protect from this, but, it is only $75k...if they are into you for several thousand, they are probably into many others for the same if not more. And, since you are a legitimate outfit, and have a contract with your factoring company, you can't just hide from what you owe unless you file bankruptcy.

I'd much rather have the quickpay option. I know exactly when I am supposed to get paid, and, when I haven't, I can make a few calls and get it resolved, and, if it becomes a problem, I simply stop running loads for that company until I get paid. And, if you stick to the majors, like CH Robinson, Landstar, TQL, Coyote, etc, you'll likely never have a problem with chasing your pay.

Again, Tall Joe, I appreciate your thoughts and experience. I am sorry if I roped you into too much here. I think we have beaten up this topic pretty well, but, if anyone has a question, you can direct it towards me.

 

Invoicing and billing responsibilities are not very difficult. I use a software to keep track of it all and do invoices and it’s not an issue. If you’re having cash flow issues, factoring is not a long term solution. I haven’t factored or used quick pay since getting my authority. There’s enough hands in the pot as it is, no reason to add another.

 

Misesian, loud sigh.

Go back and re-read the topic of the post. Does it ask if factoring or quickpay is a good, long-term solution to running a business? NO.

It is asking which is better to do, use factoring or quickpay service. I think people are smart enough to understand, by using one over the other, they will be giving up a % of profit. At least, I like to believe that.

It doesn't ask how hard billing is or isn't, what kind of software to use, or how to keep track of invoices, or whether or not either is a LONG term solution, does it?

Obviously, giving up a chunk of revenue should always be avoided, your right, there are enough hands in the pot...but, seriously, I am trying to convey to folks, if you MUST choose one over the other, choose quickpay services, much less invasive and long term detriment to your business.

Now, if you have a difference of opinion, and would like to bestow upon us the virtues of factoring that we haven't already considered, have at it. But please, let's stop debating if it is even a good idea to do...that ship has sailed, and frankly, nobody asked the question.

So please, let's stick to the topic. Thanks!

 

The op never even responded to any input from others whatsoever, as far as I can tell.

Topics veer off course all the time on this forum, sometimes for good and other times not so good.

Don't forget, particular subject "search" words often lead to threads that, although may not address the specific topic an individual is searching for, can be useful in informing & educating in a whole different way.

This thread is a clear example of that.

 

As far as quickpay vs factoring, quickpay via the brokerage house is the easiest and least cumbersome way to get one's money fast, if you need it.

I have a friend who uses Trimph, I wouldn't entangle myself contractually to those folks whatsoever.

 

Scooter Jones,

I appreciate your wisdom.

Yes, I realize that the subject of a given post tends to veer off in other directions, I am sure I am guilty of doing that at times, but, I do try to stay on target.

This particular one clearly can't stay on topic. I am watching it closely, as you can tell. Everyone seemingly wants to say how foolish it is to give the % up for faster cash flow. But, sometimes, we need to, cash flow is king, and, some good points have been made here.

But, the jist of what I am trying to get across to people is, quickpay services when available are SO much easier and way less intrusive to your business than using factoring companies, which frankly are dangerous. They will NOT reveal all the negatives I have given. But, if you read closely, it is in the fine print of their contracts which they will hold people accountable...not reading or understanding the contract is NOT an excuse!

Quickpay is a one and done kind of thing. You run the load, you get paid, there is no recourse of action once you are paid. If the customer NEVER pays the broker, you are not held liable for the shippers/cosigners insolvency. This is definitely NOT the case in factoring. Even though you got paid, you still have potential for liability of the debt, even in non-recourse factoring. The only time you are off the hook is if the shipper goes bankrupt. But, if the shipper decides for whatever particular reason to simply not pay the bill, you are going to suddenly find yourself in not so friendly waters...and, a lot of time, without any warning.

It just bugs me when the question is clear, and, seemingly, the people who don't want to answer it directly just want to poop on the idea, rather than answer the question, they just want tell us why we shouldn't consider factoring or qp services.

I don't think anyone happily WANTS to give away $ if they don't have to, but, not all of us are in a position to wait 30 or 45 days for pay at any given moment. And, some people just can't be bothered with the admin part of trucking, invoicing, collecting. To each there own, I say.

 

Factoring is just another way to say payday loan

 

p608, not really. But, I have never used a "payday" loan.

I can see some similarity, but, to say it is the same is a dangerous oversimplification.

Again, I am not sure what is expected for a payday loan, other than proof that you have a job. I also am not sure what recourse there is for the lender if your company never makes payroll. Is there recourse?

Factoring is very intrusive to your business, my guess, way more than a "payday" loan.

Like I said, I have never used a payday loan, but, I'd imagine there are no long-term contracts, no UCC filings...it is for that pay check and that is it.

When you factor with a company, they have their hooks into you for a long time and it can cost a lot more than you ever bargained for if there is a problem.

However, when compared to how an employee is paid, an owner op has a lot more paperwork involved. The O/O has to turn in a signed rate confirmation, a Bill of Lading, Proof of Delivery and create an invoice. The owner op also has to ensure that the invoice gets paid. Most times, that is not a huge effort and things work smoothly.

The use of a factoring company eliminates the last 2 items, however, not the obligation of the last one, which can end up costing a LOT of money going forward and, there in lies part of the problem when using a factoring company.

If I am wrong about payday loans, do tell. But, I don't think the 2 are even in the same ball park. Let's not confuse people who are considering using a factoring company with an oversimplification of what it is. People should be very leary of factoring companies. Perhaps they should be the same way with payday loans too, I don't know.

 

p608...in thinking about what you said further...I think quickpay services are more similar and consistent with a "payday loan", not factoring.

 

Factorin

Factoring is IMO predatory lending, they charge you to get your money and if you do more work for the same customer they make you use their service whether you need it or not