Owner Operators; comments encouraged (Factoring)

I used D and S factoring out of Fruitland,ID. They advanced 95% of the invoice with no recourse and no reserves. On a few loads that I factored the broker was 35 days late in paying,which made me glad I factored them. They also did free credit checks over the phone. Apex is another good one I would recommend out of Fort Worth. Some brokers will advance up to 40% upfront and will advance the rest right after you fax them the bills for a 3% fee which can beat any factoring fees. One catch with factoring companies is that they file a UCC filing on your invoice until they get paid by the broker,which means that you can't use another factoring company until they get paid. With good credit it is a lot cheaper to get a loan with a low interest rate than to factor. Than again most banks are not extending a credit limit high enough to small one-truck companies to be able to use and get by with until the broker pays. The only real way to get around factoring is to have a cash reserve of at least 30k or cash/credit combined. One advantage of factoring is that it eliminates the hassle of you trying to chase down the broker or make collection calls or having to keep track of all of the invoices while waiting 4-6 weeks to get paid. Factoring for most of us starting out is more of a easy necessity than a choice. I wouldn't use the factoring companies that hold a reserve on your bills as that can get confusing to track and if the broker is late paying than they start deducting out of the reserves and you could end up with less than 90% of the invoice. That is one reason I used D and S which charged a flat rate of 5% no matter how late the broker paid.I agree about not depending totally on factoring year-round as that 5% can add up to almost 10k in fees by the end of the year. Anyway that was my experience with factoring. Good idea for short term cash flow. Bad idea for long-term dependency.

 

You will probably get a better response if you post this in the O/O section of the board.

 

Money for nothing and the chicks are free!!!!!!!!!!!

 

I factor although at this point I have enough cash built up that I am considering dropping them. Someone said that you don't have to worry about collections - untrue. Unless you are on a true "non-recourse" contract, and read the fine print because there are few, the factor may or may not call the broker on an over due invoice. I'm on a graduated contract so I pay 2%-4% based on the time it takes the broker to pay. I've had to call brokers on several invoices that went past 30 days due to one issue or another (usually paperwork illegible, etc).

That being said, I have a great fuel card deal with my factor and have had a pretty good experience with them.

 

Say NO to factoring. Period.

 

D and S factors is 100% nonrecourse. I have never had to make a collection call on late payments when I gave them the invoice. Some brokers were as late as 65 days late in paying.

 

The most common way that Factoring Agents rip people off is, they say they charge a "flat fee" of 10% but the fine print says its 10% IF they receive their pay in 90 days... AFTER 90 days they charge you 1% per day/week/month whatever... Here's the good part. When they sent you your money the day that you sent them a signed bill they gave you 80% of the pay. You then call and say "you said I get 90%", they say "oh, you will we will give you the rest as soon as we get paid".
Problem is, they dont send the bill to the consignor for months or however long it takes to eat up your other 10%. Then in 6 months when they have dozens of your bills that you think they owe you 10% on, you start to realize that ALL of the payers are 180 days "late" (even though they haven't even been billed yet) and you are not getting ANY of that money.

 

Truth is it's not for everyone. If you have the cash to float your invoices, it's one way to use your money. There are alternatives with quick pay options from customers or using a line from a bank if you can qualify.

The trouble comes when:

• You think the invoice vanishes once it's sent to the factor. Fact: you still own a primary role getting it collected and they'll bounce it back on you if there's any other reason for non-pay than bankruptcy (non-recourse).
• You use factoring with sketchy customers. The ones that are problematic won't go bankrupt. Instead, they'll find every way known to man to delay payment and hold things up. Fortunately, most factors will only accept invoices on customers they approve.
• You sign up with a factor that has some flavor of an unlimited power of attorney in their agreement. It's a buy-here-pay-here mentality clause that lets them take title to everything you own if things go sideways. If/when that happens, you would have no control over that. That's what courts are for. Don't forget what this really is: a line of credit. Your bank doesn't put crap like that in your credit card agreement. Expect a factor worth doing business with to follow that logic too.
• Know your all-in cost. Don't be surprised that a great low rate or discounts on fuel or other stuff come with a cost somewhere else. Identical discount rates offered by different factoring companies can evolve into substantially different totals once itemized fees for everything are added in, then offset with any (actual) extras offered.

 

Here's an idea .. if you REALLY need the cash NOW ..
If you have enough to work for 1 month, and you are waiting to collect, can you not take your invoices to a bank and say look, I am just waiting for this money to come in, can you float me some money and when the cheques come in you will be paid? Just a short term loan.