Whats a good factoring company?

DO NOT FACTOR! If you dont have the capital to be in business..You make other carriers out here look bad.
How? Freight Rates thats how.
When a carrier NEEDS capital weekly to operate,They become Desperate.
when you become desperate..The RATES are NOT in your favor.

Guys like myself that work hard,Have the money in the bank..Suffer sometimes because shippers/brokers Know that they can get it moved by someone that is Desperate!

Please dont factor..You make all of us look hungry!

 

Factoring should be a last result. At first 2% may not seem like much, but bear in mind that they also keep 10% in reserves. And it is up to the factoring company to decide weather to release them or not. They will make excuses not to release them and you will be at there mercy. tomkatrose makes a valid point.

 

10% in reserves? I am not familiar with this process with any of the factoring companies we researched.

We occasionally use factoring as a safety net. They are not used for all of our Accounts Receivable. Because we run a lot of cross country hauls and some of those have a return trip for the same brokerage, we can be 10 days on the same invoice before submittal. If a company pays 30 days from receipt of original invoice and BOL that could mean approximately 45 days wait for 10 days of income so it is worth a small percentage which I calculate the costs into the quote to the customer to cover it as a business expense. Second reason we use factoring is a brokerage is newer or one with shaky credit. Until they have a strong satisfactory credit line we can see with a credit check it is worth a small percentage, we have nonrecourse, to us to not lose 100% of that income. If we had to file on a broker bond we would lose a lot more including the time to collect.

I would disagree that companies that use factoring are desperate and make the industry look bad because of taking cheap rates. I believe the opposite in that I make certain if we are factoring that costs is covered in the load so we need more to cover the costs of our truck, profit margin, and factoring. Factoring if used wisely is a business tool to keep cash flow flowing and not be putting your business in jeopardy with credit cards and causing yourself to pay higher interest rates.

 

When a carrier NEEDS capital weekly to operate,They become Desperate.
when you become desperate..The RATES are NOT in your favor.

Don`t have anything to do with the rates. You can haul cheap or the highest paying loads out there, if you can`t get your money from the brokers you can get in a pinch. It is called cash flow. I never did want to use a factoring service but the cash flow was getting worse each year so I felt I had no choice. I went with a company called RTS out of Kansas and really like doing business with them. For a small percentage I receive my money quick and get to use their web site to check the brokers credit before booking the load with them and you would be surprise to the number that do not meet RTS credit rating.

 

I'll come out right away and say that I work for a factoring company. I'm not going to try to sell you on our company, but instead what you should be looking for in a good company. There are bad factors, and there are good factors.

Factoring gets a bad name because of the fees. But at 3-5% for a good factor, you are in-effect: purchasing a small office of people.

What I mean by that is that we run your paperwork, keep track of the majority of your accounting, evaluate and negotiate payments with brokers, and act as a collections agent. How much would it cost to have someone on payroll to do all of those things competently? Or even one of those things competently? How many hours a week do you get them? Are they going to work from home or will you rent an office? Are they going to float you money in 24 hours or less for your loads? Can you do all of that with just 3%? A good factor can.

With a good factor you get an office full of people running your paperwork, collecting your bills, and bugging brokers for payment, 40 hours a week. A good factor wants to help you grow your business, not devour your profit and nickel-and-dime you into the ground.

You should get payment on legitimate paperwork within 24 hours. You will get someone live on the phone every time you call. They will give you professional advice even if it doesn't relate directly to factoring and talk shop with you whenever you're on the road and just need a friendly person to talk to.

Factors get this reputation for being bottom feeders and taking advantage of desperate carriers. Good factors are not looking for desperate carriers. They are looking for competent drivers with a good head on their shoulders, independent or family operated, and simply need an office at their back to help with operations until they can afford to invest in one themselves.

Quick pay through a broker is a great deal. If you can get it: take it. But not many offer it, a few are 48 hours, and most are still 7-14 day, most are not 24 hours or same day pays! A good factor will let you pick which brokers you want to factor because they want your business to grow. If that means using quick pay on some brokers, they should not have a problem.

I saw fee today from a broker on a $45 cash advance for a lumper, the fee was $10 due to the "X percentage or $10...whichever is greater" stipulation...that carrier just started with us and kicked himself when I told him he could have got that same advance through us for 10 cents! He was taking advances from this broker about every other load. I saved him almost 6-months of our factoring fee just by looking over his paperwork. Throw in the fuel card discounts and his savings has offset nearly the entire cost of factoring for the year and he still gets all of those things I discussed above.

You will know when it is a good fit and you have found a factoring company that is on your side. It will not feel like you're just buying a quick-pay or taking some kind of pay-day loan, it should feel like you're buying an entire team of office people to help your business.

 

Thanks for your post! I did not quote it entirely due to length. The part that I did quote is what matters to me. You're speaking of value added service. It took me several weeks to make a choice on a factoring company due to this reason. Most I contacted were a toss up between pawn brokers and timeshare sales. A whole lotta bun and no burger.

A factoring company should be dealt with and managed as an outsource service provider, not as a loan company. If you're not doing that, a loan company is what you get. I deal with my factoring company in the same fashion I use with a repair shop, my banker, my accountant, and so on. I set clear expectations of service. I'm in contact with my account manager at least once a month. Usually to clarify a complex invoice matter, other times to ask for something they can help me with under extraordinary circumstances. I spot check their work. I call on my customers from time to time and ask them about contacts with the factoring company. When I find shortcomings I demand corrections. A few times a year I review recent months to make sure I'm still getting the value I expect. Bottom line is that I am the client, they are my contractor. It doesn't matter if you're running a multi billion dollar contract, or funding an $800 invoice. It works the same way.

I've been with eCapital (formerly Freight Capital) for coming up on three years. Along with predictable and prompt cash flow, I wanted them to be my A/R department. In fact, that very discussion topic came very early in our business relationship. The second invoice ever, to be specific. I don't think my account manager had ever had a conversation that went the way it did. In a nutshell, my message was: "If you're not adding value to my business, I don't need you around. Here is the value I need to have from you. Can you deliver service?"

A few times I've added up the various fees I'm charged. It comes out to about the same amount it would cost me to hire a competent part-time (20 hrs a week) A/R clerk. The good news is I don't have an extra W2 mouth to feed, I don't have to hear about why they were late to work or need a vacation, need a special chair, want a promotion, have to replace them when they find their full time job they want, none of that.

Over time, that business relationship has continued to improve. I've negotiated better terms. Handling process has improved as well, truly enabling a near paperless A/R process that I can run from my truck via internet and phone. They have to earn my business with each and every contact.

Edited to add: Since different clients have their own ideas of value, there's not a perfect fit any one can recommend regarding a factoring company. What works great for me may not be a good deal to someone else. The converse is true as well. Just because you like (your factoring company here) isn't a guarantee that they will meet my business needs.

 

I have experience with "Interstate Capital" and "England Factoring". The IC pays 95% in 24 hours + $5 for every TripPak envelope used. In both companies I can check the broker credit in advance (on line), England pays 90%, on collection they pay the rest of the 10% - 2.5% fee and $3 for the ACH transfer to my bank account. I never had any problems with them. The scary part comes when they can't collect after 90 days. One banker told me that, these companies all advertise as NON RECURSE funding, but such a thing does not exist. If they don't collect, they will come after you.

 

Some of the world's largest corporations use factoring to maximize capital. Every business must have cash flow to survive. I have a different outlook than some. I have not used a factor in several years, but did use one for a number of years. I won't try to sell factoring, but it has benefits. While it is true that you give up a couple of percentage points in order to factor, you also gain the cash flow. When you have cash flow, you can afford to wait on the better paying loads. I am careful to whom I give credit. I have a small group of companies that I do most of my business. If I felt that I needed the cash flow, I might consider going with another factor. With a factor you send them the paperwork and they give you the money, usually within a couple of days. I used a non recourse factor. If there was a new company that I was thinking about hauling a load, I could call the factor and check credit. If you don't use a factor and extend credit, you really should be using a credit service. Since most factors offer credit checking, it is one less expense you will need to incur. Sometimes, it is better to lose a few points and have the cash flow so that you can go on to the next load. With the high cost of fuel, tires, etc., you can burn through a lot of cash in a very short time. By giving up a few points to a factor, it could actually result in more revenue and a higher net than if you had to sit and wait on the cash flow to come back to your bank. By the time you haul the load, bill and receive your money, it could easily take 40-60 days. If you can carry the receivables, then fine. If not and you need the cash flow, then factor. However, most brokers do offer quick pay for a discount on the bill. That can take away the need to factor. If you choose to factor, make sure to read the fine print. The factor that I once used changed their terms and it was at that point that I decided to terminate our relationship. We had a good relationship for a number of years, but they essentially wanted to be able to go into my bank account and charge back any invoice that they choose. That changed their service to recourse instead of non recourse. They still wanted to charge the same fee. That was unacceptable to me. I decided that I would not pay for non recourse and give a factor the ability to charge back an invoice to me. I don't think that I ever factored an account with them that did not pay. I tried to be careful of those whom I sent them. I looked at quite a few factors before settling on my old factor. It was the right decision for me at the time. It is much easier to wait for the better paying loads when you don't have to worry about cash flow.

 

I have finally found a factoring company that makes collection calls and does more than a basic credit check. They are large enough that they can see trouble with a broker/company before it starts showing up on a credit report. We looked at a large project and the factoring company said they wouldn't extend that level of credit due to an increasing slow pay and the company had gone from 4 payable people to one that just took messages. That information alone saved us 2-years worth of factoring fees.

The broker didn't renew the bond and we would have been out a bunch.

 

Can you share with us the name of this company?