O/O - Factoring Versus Net 30 (60/90/Never)

my available cash got pretty tight for awhile. I considered factoring but like others mentioned, enough of my brokers offered a quickpay option to get by for awhile. I also offered the brokers my own quickpay option on my invoices. Which was just a discount for checks postmarked within 2 weeks of delivery date. Many of them took advantage of my offer. I might keep offering the quickpay option, I figure it might help alert me to a potential problem early on.

 

I don't want to do business with anyone where I extend credit if they have less than 90, either. Most factors that are non recourse pay 100% less their fee. If your factor pays 90% and the balance when they receive payment, then it sounds like it is recourse. If it is recourse, 2.7% is a high rate.

 

I used to deal with a non recourse factor that charged 5%. Th only additional fee was $1 for doing a ACH transfer. When I first started with them they furnished Trip pak envelops that they paid for and they usually received the invoice and bills the next day and the factor would release the funds the same day as they received the paperwork and I would have money in my account the next day. They eventually started to use Transflow or faxed copies of the paperwork. Most recourse factors charge based on how long it takes the shipper or broker to pay rather than the flat rate of most non recourse factors. Some do have minimums or additional fees. That is why it pays to check around and make sure to read and understand any contract before signing.