Factoring - What's normal and is it worth it?

No. It's just not a sound business practice. Nobody is saying that you need to be rich. But common sense says you need to have enough reserve capital to run your business. Factoring is a crutch. That let's poor operations. Keep running. It's much different. Than say hiring an accountant to handle your account receivable/payable. It's literally saying loan me some money. Because I am too poor to wait 30 days to get paid.

 

Basically it's rather simple, companies that don't offer quick pay or the quick pay percentage is too expensive you use a factoring company if you are not able to wait for standard pay. Standard pay is usually is in excess of 24 days. To avoid using factoring, or quick pay you need to have about 6 weeks worth of funds to cover all your expenses, and to pay yourself.

 

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But it’s what he should consider.

Questioning the long term need to factor isn’t gatekeeping. Before I was in trucking I sold receivable financing (factoring) to small businesses in the late 90’s/early oughts. They were financed through local community banks and they were always more expensive than a line of credit. Receivables usually turned (we’re paid) from 45-60 days and the rate was usually 3.0-3.5%.

You get on here and there are folks that will tell you absurdly low (I.e. fake) factoring fees.

Bottom line is this: Factoring is never more profitable than using your own savings and saving up enough money so that you don’t have to factor isn’t impossible.

 

I agree with you @crocky. Truck drivers are like cosmologists, frequently in error, but never in doubt.

 

It's not the 30 days waiting o get paid, it's the 12 month back and forth battle to get paid 50% of what someone owes you that the factoring company protects you from, no?

 

If you can keep up with inflation. Gotta get 20% annual returns or better right now. When inflation gets this out of control people just start living for the moment.

 

I'm a rookie O/O whose authority only went active this week, but I'm going to give NOT using factoring a try.

First off, you multiply that monthly rate of 3% by 12 and you get something like a 36% yearly interest rate? That truly is a huge, payday loan style hit. Secondly, I'm getting a free broker credit rating lookup service through OOIDA, and I'll be using it. Next, if a broker doesn't cough up I won't be going after him, I'll be filing a claim with his bonding company. I've read (here, thanks!) that this tactic can be extremely effective. And lastly, I do have some questions about just how many of the people in this thread sowing fear about not being paid have actually experienced this themselves? Or are instead just passing on apocryphal horror stories. I guess I'll be finding out soon enough...

 

I couldn't get out. HOSTAGE. And if they know you want to get out, they might ruin your relationship with brokers.

I had one lying to the broker! If the broker doesn't pay in 90 days, they will take the money they paid you. So, it's more like a loan.
Everyone paid. But if there is a problem, the factoring company won't solve it for you.

 

Are you telling me that they don't direct deposit your money into your bank? Isn't it kind of prehistoric to still be using mail?