Freight factoring

Factoring companies flash lows rates like .49% or 1.5% to get your attention but unless your "Monthly Factoring Volume" meets minimum qualifications or your broker pays the factoring company in a lightning fast 15-30 days...you will not be enjoying that low teaser rate.

Be sure to read the fine print on Factoring contracts and ask these questions in regards to rate and programs:

1) How long is that rate good for? 30 days? 60 days?
- Most credit worthy Brokers pay the factoring company in an avg of 30-45 days. So, unless it's an unusually fast paying broker, you won't be getting that teaser rate of 1.5%.

2) Do you have Minimum Factoring Volume Requirements?
- Basically, you are REQUIRED to factor a certain dollar amount per month and can be charged a fee if you fail to hit it
- Important to know, the higher your factoring volume, the lower your factoring rate (like any business)
- FYI to actually get charged a 1.5% flat factoring rate, your volume most likely needs to be in the neighborhood of $100,000 per month...or more...typically.

If you don't know how much your factoring volume will likely be and just want to test it out, then choose a factoring company with NO Minimum Volume Requirements or Monthly Fees (Freight Capital offers a program like this). Keep in mind, a "no minimum program" will likely carry a slightly higher rate, somewhere in the 3% - 5% range depending on your volume.

When factoring is used correctly, it can most definitely improve your cash flow and make your business more flexible. Have realistic expectations and know your strategy.

 

Is this rate compounding or sliding? Meaning, if I wait another 44 days (30 days plus 2 weeks), will I have to pay 2.59 percent or will I pay a different amount?