Any first hand experience with OAK HILL CAPITAL CORP?

The red flag to me is "no reserve, no recourse". And at 3.5%. Get to know the business model a little better, read and UNDERSTAND the contract. While I don't have the time to dig into them for you I will say that it is sounding like they are trying to make it sound great and get people into a contract they don't understand and cost a ton to get out of.

 

I have talked to Steve at Oak Hill before.My friend,Brian is hooked up with them and loves it.
Straight 3.5 and no bull except one thing
they have a long list of brokers they will factor,if they ain`t on the list,they don`t factor them.Fax paperwork in to get paid.Then you mail in the originals later.All in all,a good outfit and i may still go with them later on

 

To be brutally honest, the fees are where they make their money, not the percentage. More about this at the end.

All this says is that if who your "customer" is creates a conflict of interest, they will collect it in full from you. And that they will use other amounts due you to settle one of these. They have probably been defrauded with fake invoices, under the table payments, or some other deception at some time. This clause lets them drop the hammer on you if they even think that is what's happening.

I'd be wary of the first sentence. It reads that they own all your accounts. That's bad. It means that you must assign all of your accounts. A more reasonable offer would say something to the effect of "assigned accounts." That is, you can factor some accounts while keeping others direct billed.

What you really need to do is two things.

1. Read, re-read, then read again, then have someone you trust read three times, two important sections in that agreement. Then read them again. Default and Termination. Default will describe what they consider to be actions that will put you into default of the agreement, along with what will change and what will happen if you are in default. You will be surprised at some of the things you might consider not such a big deal that would put you in default status. Termination will explain the many flaming hoops you must jump through in order to get a release from them once you've finally decided to divorce them. There will likely be awkward timelines, extra fees, and so on. If you happen to be in default it will certainly be even worse.

2. Run some test scenarios, both on costs (fees) and timelines. Get a spreadsheet and run the numbers. Take a sample month of business and apply this agreement. Don't forget your bank charges and fuel card use. You absolutely must know the true cost of doing this. Don't get suckered into thinking like it's only $35 on a thousand. By the time all the fees are in, you'll probably be more like $100-$150 per thousand. With respect to time, get a 12 month at a glance calendar out. Start with the funding process and count the days. "Fast" pay may not be as fast as you think. Obviously, faster money costs more. Decide just how fast you really need it. Then, most importantly, walk through the default and termination process. Count up the days of advance written notice by certified mail and other death defying acts you must complete in order to reach the end. You will most likely have some serious planning to do. These agreements are constructed to basically wipe your business out if you decide to part company under anything less than totally amicable conditions. Decide one day you're through with them? Another factor offers to buy your business? I'm willing to bet that will come with a royal screwing on your way out.

There are also two very important perspectives you need to keep when evaluating an offer of factoring.

One is that darn percentage again. Not only figure out what the "true" percentage will be, but also calculate it against profit, not revenue. Here's an over-simplification to illustrate. Say you haul a load that invoices at $1,000. You know from your business model that your profit is $200, after all your costs, fuel, paying yourself, etc. 20%! Awesome. Now your factor takes their 3.5% plus a $20 bank fee, and invoice fee, and a few other fees. Then you use their fuel card, oops there's a $1.50 swipe fee. Maybe pay the lumper with a check off that fuel card, another fee. Before you know it, it's cost you $100 to use them. 50% of your profits are gone.

The other thing is what I call the "soft" costs. Costs that you will never see on any statement ever, that you can only figure out with a lot of effort from your own numbers. I'll re-use the fuel card example. They are nearly always cash price minus discounts, if there's even a discount. And there's a fee for everything. So maybe right now you're paying with cash and that's not such a big deal. You get a 3¢/gallon discount after all! What you really need to do is measure that program against a real one that offers cost plus discounting. NASTC for example, and there are others. You'll find that awesome discounted fuel card they're offering you is going to cost you more than paying full cash price with a stack of greenbacks. I could go on and on. Tire discounts. Roadside service. Anything with the word "service" in it for that matter. If there's an angle they can use to get in your pocket, it will be there.

With all that said, you're probably thinking 'ol Red is just sour on factoring. You couldn't be more wrong. I have used a factoring company from day 1 and been with them 4 1/2 years. They have delivered exactly what was agreed to in the beginning. They have worked with me through my learning curve in the industry, as well as the ins and outs of factoring. About a year ago, I started unwinding that business relationship. Carefully and cautiously, until last August they no longer had any outstanding invoices. As accounts reached zero balance, I have had them released. Soon I will ask for and be supplied with a universal release, ending the relationship. They served their purpose, and my business has matured beyond the need to continue with them.

So what company is it? you might ask. Sorry, but I will not name them any more. The following is also a motivation for me to move on from them, and factoring altogether. The reason I no longer recommend them isn't because I think they're bad. I don't. I like them personally, and have had many positive interactions with them over the years. It's because I no longer believe they offer anything more special than any other factoring company. This due to a couple of referrals I made to people I call good friends, that went badly. While I believe that my friends brought the badness upon themselves, I also believe that there was no deliberate intent of fraud or deception. Either a simple misunderstanding of terms, or an innocent mistake. More importantly, I believe that the factoring company went straight to a nuclear option in those cases when it wasn't appropriate. So my days of being their public cheering section have ended.

Good luck on whatever you decide, and sorry for being long winded with my reply.

 

Good read! Great job! Redforman.