Ok, let me put it to you this way. You can get a 30 day loan at the bank for around 0.8% interest (10% apr), compared to factoring at 4%. The math is still the same. Banks loan money based on apr, loan sharks (ie factoring companies) loan money based on 30 days. The only way you can compare the two is to convert to apr.
If you want to factor loads, go ahead, I couldn’t care less. Just don’t try and sell it as a sound business practice.
good Non-recourse factoring
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I look at it like this, lets say you are paying 8% per run/ Invoice...
and you have 30/60/90 days to pay? (That's a loan/ no credit check/ Your income/invoices/runs/ driving is your credit)
Why many people do use factoring companies (NOT Bankers) is It really means, YOU CAN GET PAID THE SAME DAY OR THE NEXT DAY ON THE LOAD YOU HAVE JUST RAN!!!! (YOU RUN TODAY OR A FEW DAYS, AS SOON AS YOU FINISH, YOU SEND THE BILLS TO THEM AND "POOF", "BOOM", YOUR BANK ACCOUNT OR COMDATA CARD IS PAID IN FULL, MINUS YOUR FACTORING FEE!!!!
*(IT REALLY IS THAT SIMPLE!!! SOME COMPANIES ARE REALLY GOOD AND FAIR ABOUT IT AND BEEN DOING BUSINESS FOR MANY YEARS!!! FACTORING IS NOT JUST FOR THE TRUCKING INDUSTRY, MANY INDUSTRIES USE THEM...)
Just like electronic log books, people have to learn and evolve their minds!!!!
Just because some older truckers say it's a bad idea, the reality is, it's actually SMART BUSINESS & KEEPS YOU RUNNING IN THE GREEN/ PROFITS!!!!
Any smart business person who can get paid daily 7 days a week is a smart person indeed!!!!
The companies themselves are the ones taking the chance on US!!! (As long as you use a good, reputable company, don't go for the really bad new ones that have all the bad complaints, just like the really bad Carriers!!! My 1st truck one of the owners of the company bought the truck, I mean took out a loan, trusted me and didn't even know me, just on the word of his partner, that knew my wife for 15 yrs and used to work with my wife in a hospital, so that's a loan to me, I don't have to pay back, but just work and get my pay each week, decent pay, park it in front of my house and drive it how I want each day I work, a 5 day work week or more if I want to run!!!
*That's what factoring companies are doing, taking a chance on you and paying you up front, today, in the NOW, for work yo did, BEFORE THE COMPANY/ BROKER/ SHIPPER EVEN PAYS THEM, SO THEY ARE TAKING CHANCES ON YOU!!!!
That's what smart business people do!!!! That's what big business does that you hear about when they get $$$ from the Govt....... And we get to do this as a small business!!!! Cant get better than that!!!
WE GET PAID BEFORE THEY GET PAID!!! WOW!!! I LOVE THE IDEA!!!! (Just get with a legitimate, good company!!!)
Peace and Love!!!!
The risk is primarily on the company paying the shipping, with the trucking company as a cosigner on the loan they advance against the invoice.
The risk they take on trucking company is the paperwork and the load is real.bigbyrc Thanks this.
I don't give up and I never said that factoring was a good practice, we're just looking at what it is in terms of how much it costs.
I did not know it was based on 30 days at all. I thought it was based on "per invoice" fee, rather. You give them invoice and BOL and they pay you the invoice amount -their fee. We're talking about the same thing on different wave lengths.
If you factor $100 000 worth of invoices per year at 4% - you end up paying $4K to factoring company.
If you use a bank loan at 8% when $20 000 is drawn the whole year to cover the invoices, it is $1600.
Let's leave it at that.
The reason I say 30 days is that is around the time you’d have to wait if you didn’t factor. Sure, some outfits pay on 45 or even 60 days in some cases, but even then factoring is still expensive.
You can rest assured the factoring company has their butt covered, they aren’t in business to help the trucker. Their sole purpose is to make money off truckers who can’t manage their business without them.
I’ve said this on just about every factoring thread but I’ll say it again for newcomers. Anybody that is thinking of going out on your own, have at least 2 months worth of expenses money saved up before you start your trucking business. If you do this, you should never have to use factoring. If you can make it the first 2 months without money coming it, you will then have a steady flow of money coming and will be set. If you start factoring from the getgo, it’s hard to ever get ahead enough to quit it.
Yep if you can save some $$$$ THAT'S ALWAYS THE BEST WAY TO CUT OUT THE MIDDLE MAN BS CRAP, BUT IF YOU CANT AND NEED TO CRUNCH, THEN FACTOR REAL QUICK SO YOU GET $$$ FAST!!! YOU ALWAYS HAVE TO PAY FOR BORROWING $$$, EVEN IF IT'S YOUR MOTHER!!!! UNLESS SHE IS HELPING OUT OF LOVE!!!) LOL HA HA HA
Peace and love!!!HopeOverMope Thanks this.
I have a 7.5% APR LOC of credit. Let's say I take a draw of $16,000 and pay it off in 30 days.
Let's say you factor the same $16,000 at a 4% fee. How much interest would I pay for using that $16,000 for the month at 7.5% interest APR vs the 4% fee you would pay?whoopNride Thanks this.
$640 to factor $16k at 4%
In the example above, it cost over 6 times as much to use factoring.
It doesn’t matter though, people will still argue that factoring is a better deal.
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