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

Keep us posted. Good luck to you.

 

You've got the right idea. To find the Annual Percentage Rate, divide the days in a year by how long it takes the receivable to be paid (or turn).
If 45 days: 365/45 = 8.11
8.11 x 3% factor rate = 24.33% APR

The better idea is to get a line of credit with a local bank that is comfortable with lending on receivables. They will probably lend 50-70% on the receivables value and will charge around 7% to 8% APR.

 

Yes I understand that, but try getting a line of credit from a bank as a new company, or maybe you showed a loss the previous year. Not everyone can instantly start a business with paid off everything and 6 months of backup funds. In fact, even most fortune 500 companies could not run their business for 6 weeks on their own cash reserves..

Right now, I don't factor but Im' not against it.

 

I've had multiple brokers who don't wire and only do checks.

 

I'm not at all saying they are wrong about it. However, the simple fact is not everyone can start out fully funding themselves and even though factoring might be a crutch, it still allows one to walk before they can run.

 

I'm not saying everyone or all are wrong either. I also realized after posting a few replies in this thread I was only looking at factoring as a way to collect payments. I realized some new guys are using factoring as a way to get through the next fuel-up. I think some people in this thread are so strongly against factoring because they think saying "factoring in OK in some circumstances" is like giving approval to operate a truck with no money and no cushion. Nobody should be doing that.

 

No one should do that, but oftentimes many people find themselves in that situation and if they can use the ease of access to money to pull themselves out at a fee then so be it.

 

No, it's a risk-management strategy.

 

I've Not been paid back 25 years ago when I was a Newby and O/O after taking a load and it was a headache chasing down the money and having to work. A lot of people on this forum polarize the situation by discouraging others to do it their way but from my passed experience being in the business for 25 years there are other ways as well. Factoring is an option & for those who don't have time and want to make money whiles losing 3% for non recourse with a reasonable Factoring company why not? Yes, 30 day waiting periods aren't that long until a Broker screw you out of money or in my case 25 years ago they went bankrupt so I never got paid even after losing lawyer fees (they had a good credit score too when this occurred do they paid O/o on time...just not me at that time). Everyone acts as if they are geniuses typing on a forum until they're in that perdicament. Even when a O/O has $40k sitting in reserves it doesn't mean they want to lose $3000 because a broker went bankrupt & didn't pay them. I'm going to use non Recourse Factoring on some accounts once my Authority begins in April.

 

Along the lines of what the OP asked.
Once you sign up with a factoring service, do you have to use them for every load?
What if OP starts working semi-regular with a broker he feels he can trust to pay on his/her loads within a reasonable time.
Can the OP not use the factoring service for that broker but still use it for other brokers that are not regular/familiar?