good Non-recourse factoring

Of course! That's if you take a short term loan, pay it off after 30 days and don't have to do it every month,
In my case, the accounts receivable are constantly 10-15K or even 20k lately. On average, I wait 3-4 weeks for checks to arrive by mail. I can wait for money and I do but If I could not, then I'd be carrying a constant 15K -20K balance. Or taking 30 day loans over and over again. So that monthly percentage fee after 12 repetitions (I forgot to add that) would be almost the same as APR. That's what I meant. I never said that factoring is better or cheaper vs bank loans, though.

 

TallJoe, I'm not sure where the disconnect is. Your previous example is not the same.

Let me try it one more time. If I borrow 16,000 a month every month for 12 months straight at 7.5% interest and pay the 16,000 per month off each month as I go, my total interest paid would be less than $1,200 for the whole year.

Factoring the same 16,000 every month for 12 mos at 4% would cost $7680 .

That is, as was previously noted, 6 times more in interest paid.

 

I think what he may not be getting is the use of 7.5% is obviously more than 4% and not seeing they are comparing apples to enchiladas.
the 4% is a one time fee for 30 days.
The 7.5% is the APR, which, if broken down to 30 day intervals is close to 0.6%

 

Not only that, the 4% is the fee charged whether it's one day or 30 days.

If I borrowed at 7.5% APR and paid the amount in 15 days instead of 30 days, the interest paid would be half of what I previously noted.

 

I focused, unnecessarily on technicalities, at first trying to dismiss the 48% as not so good illustration, and some of you thought, improperly, that I was arguing with you. It is very funny because I don't even factor.

Owner operator A: after 30 days of OTR work, has $20K worth of invoices, he has money in the bank, and can wait, so decides to send the invoices to his customers and waits patiently 30-40 days for checks to arrive.

Owner operator B: after 30 days of OTR work, also has $20k worth of invoices and does not have money in the bank. He cannot wait. Needs money now but he has a good credit so he goes to a local bank where he gets a short term 30 day loan, which he takes to cover his life and business expenses and similarly as Owner Operator A, sends the invoices to his customers and waits for the money. When they arrive, he simply repays the loan with the interests for the 30 day period which is 8 percent APR divided by 12. So he returns 20 000 + 133 . It costs him 133.33 more than owner operator A because he did not have money or did want to wait. However, if he repeats the process every single month, taking 20 000 loan, paying 133 every month 12 times a year it will cost him 133.33 * 12 = 1600 a year. That is exactly, the same as if he gotten himself a credit line at 8% APR and used 20k throughout the year.

Owner operator C: after 30 days of OTR work, also has $20k worth of invoices and wants to factor, so he sends the invoice to Triumph for 4% and the next day has 20 000 -800 (4%) = $ 19200 deposited to his account. It costs him 800 to factor $20 000. per month. if he repeats the process 12 times a year then it will cost him 9600.

 

By and large, the best thing to do is to get into a position where you can wait 30-45 days for your money. Factoring or taking out short term bank loans to keep cash flow going cost you a lot in the long run, and is a recipe for disaster if you can’t get your cash flow straightened out.

 

Btw, I don't factor or use my short term bank line of credit to fund my day to day operation. I have only used the LOC example to demonstrate just how much factoring really costs.

If someone has to pay a 4% transaction fee to stay afloat every month, there are fundamentally other issues involved. Which is for another day's discussion.

 

Pay4Freight offers no long term contract and non recourse.

 

A dude told me he pays those guys 4%. Is that correct?

 

I use factoringexpress.com friend and haven't had any issues with them yet.

They charge me 3% flat with no monthly minimum.