Looking for a good factoring company

"Good Factoring Company"? That is an oxymoron if I've ever seen one. In my opinion, if you need to rely on a factoring company for your cashflow, you are notready to run your own authority. It makes absolutely no financial sense to pay someone 5% + to get your money 30 days sooner. Do the math. That is 60%+ APR that you are paying for your own money. Does that not sound like insanity to you? Factoring companies are in the same area of the food chain as payday loan joints and loansharks.

Anyhow, enough of my ranting and lunacy. To find a factoring company, put all of their names on the wall and throw a dart. They are all equally worthless parasites.

 

For 3% you are talking about a "recourse" factoring company. What this means is if the shipper/broker stiffs on the load, it will be you holding the bag, not the factoring company. It also means that if the factoring company hasn't been paid by shipper/broker in a certain time frame(usually from 30-60 days), they will deduct it back from you and once again it is you holding the bag.

Now, you are absolutely right. My opinions without regard to validity are not helpful to you. What I would do is instead of spending all of that money with a factor, spend a fraction of it on some HELPFUL tools such as running credit checks on shippers/brokers. When you run a credit check on a broker or check their gold book rating, you will very quickly be able to decide if they are worth taking a risk on and hauling their loads. In addition, there are many of the larger, well established brokers that have their own quick pay programs and pay invoices in a matter of a few days. These companies usually charge 1.5-3% of the invoice for that service and you assume NONE of the RISK that I described earlier in this post. The point is; you can manage cash flow without getting ripped off by factors if you pay close attention to what you are doing.

I'm sorry if you are offended by what seems to be arrogance on my part. I answer questions on these types of subjects in that manner intentionally. It is my opinion that it is my duty to be blunt and completely honest as to the realities you will face if you take this next step. If you have a hard time dealing with criticism from someone who is trying to help you, then how are you going to deal with all of the predators and sharks you will be dealing with daily? These people make their living on being more experienced and more knowledgeable than you are. That is their business, and most are very successful at it.

In closing; I'm really not a condescending prick. I will answer any of your questions to the best of my ability and will try to walk you through things. There are others here that are as qualified or even more so than I, and will do the same for you. I wish you the best if you do make the leap, and promise to not sugarcoat anything if you ask for help.

Good Luck to you

 

I hope that your plan in Factoring includes an exit strategy from Factoring as well. Eskimo is 100% correct in his assessment the same as you are correct in the fact it is your decision. Certainly the factoring thing can be beneficial I think in the beginning, but like I said, you need an exit strategy also. Example: Factor 100%, if you need that much that quick, for the first month while saving every nickel you can. Factor 50% the second month while saving again every nickel you can. Keep reducing the portion you factor and taper off so you don't end up giving away thousands of dollars every year you could otherwise have for yourselves.

I'm going to use round numbers here just for easy math, but let's say you run 25 loads per month at a gross to you of $2000.00 per load. That's $50,000 per month in invoices you're due. If you use a non-recourse factoring company at 7.5%, which is about par for non-recourse, you will straight up "give" away literally $3750.00 each month or $45000.00 annually. If you ultimately end up factoring, make certain, for your own pocket's sake, it's a short term solution.

Also, to answer your initial question, and purely for the convenience of all they offer that goes with it for your short term solution, take a look at Comdata.

 

I am not sure why Eskimo has posted such negative comments about factoring. Perhaps he had a bad experience with an unscrupulous company. In truth, accounts receivable financing, commonly known as factoring has many positive aspects as well as some negative aspects. Most of the negative aspects are actually attributable with who you factor with, not necessarily the act of factoring. Most large corporations in the U.S. do some form of factoring. Rates and fees charged are extremely variable as the factoring industry is not regulated. Most companies base their fee structure on the volume you are going to factor as well as the size of your company. The more you factor and the larger your company the lower your rates or fees. Also, factoring is considered a business expense so even though you are paying some fees to get your money faster than net 30 billing, you should be able to deduct at least a portion if not all of the fees you pay to factor. Eskimo mentions brokers that have a quick pay program. The problem with this is that brokers have no responsiblity to disclose to you how much they are withholding on the front end to charge you to quick pay you on the back end. I know brokers who retain upwards of 30% of the bill if they know you are going to quickpay with them. So even though they may tell you they are "only" charging you 1 to 3 % for the quickpay, they keep a much higher percentage on the front end. Also, not all factoring companies are "worthless parasites". Just as in any business or industry there are good and there are bad. Some of the good ones are: Flying J's bank that does factoring, Transportation Alliance Bank (only company that factors that is regulated by the FDIC), and Freight Capital out of San Diego. The bad, Capital Depot, D & S Factors and many others like them.

The only thing that I agree with Eskimo about is that factoring should not be a long term proposition. It helps greatly with cash flow and with growing a company. Most companies factor for a year or two and slowly gain their footing and then don't require the help. Bottom line is that it is your decision alone to make and your company alone to grow. Don't allow me or Eskimo or anyone else make a decison for your company that may hurt you in the long run...

 

You are a Flyin J employee I presume? Oh well, doesn't matter.

You make some good points relevant to general business practices and cash flow issues. However, most of the businesses that you are referring to only factor money for large capital expansion and aggressive growth, not for day to day expenses and normal cash flow. Large, well established businesses can absorb a short term hit on large amounts of money. A small startup company running on already thin margins cannot take that big of a hit on ALL of their revenues and expect to be successful.

As for the brokers quick pay being bad; What are you talking about? If you haul for any broker, they are going to take their cut off the top(whether a fair amount or not) regardless of whether they pay you in 3 days or 30 days.

As for what I have against factors; No, I have not had a bad experience with a factor because I have been smart enough to never use one. If I could manage a trucking company and grow it to a fleet of 16 trucks and 26 trailers over ten years without EVER factoring any of my revenues, then so can other people.

Do MOST startups in the trucking industry factor money from the onset? Absolutely they do. But the successful ones do it only for a short time. Just like the other poster said; if you must use a factor, have a clear exit strategy in place.

 

A small startup company needs cash in order to get up and running and to keep running. Companies that are truly concerned about their clients will help them with keeping fees low and allowing them to move on when they are ready.

I never said that brokers quick pay programs are bad. I said that if they know that someone is going to utilize their quick pay system then the amount they withhold from the bill on the front end goes up. Period. Every trucking company should be made aware of the facts whether they are dealing with a broker or a factoring company. Brokers are not kind and benevolent and they are not going to do that for a measley 1%. I talk to brokers all the time and that is how they work.

As for your inexperience with factors, if you have never used a factoring company then how can you lump all companies in the same group as being "worthless parasites". You are entitled to your opinion, but generally I would take the opinion of someone that has experienced something over someone who hasn't.

I do work for a factoring company and many of my clients are in business today because of the quality service and business help that I and my company have given them.

I applaud the fact that you have been able to grow your company in the manner that you have. However, when was the last time you spoke to a one truck business owner that is unacquainted with the business side of the industry? From your comments anyone can see that your experience and sophistication is far above most other trucking companies in the range of 1 to 20 trucks. Should it be that way? No. But the fact is, that it is the way it is. Most companies are owned by good truckers but not skilled or good businessmen. I try to help them to succeed and get that sophistication and experience so they don't need to factor with me or anyone else anymore...

 

My "inexperience" with factoring companies does not lend any more bias to my position than does the fact that you work for such an entity. We can sit here and butt heads all day and no good will come of it for either of us(except maybe a headache).

Although some of the implications that you made were a bit unnecessary, most of your assumptions about me were correct. I am a businessman who happens to also drive a truck. I am educated and always continue to self-educate. I can also see you for what you are. You have a job to do and ideas and concepts to sell. Just because I feel that you are spreading propoganda to further your agenda, that doesn't mean that I begrudge you for that. It's quite to the contrary, in fact. I don't see myself as much different than you are. We both sell ideas, products, or services and I will assume that , like myself, you are very good at what you do.

Most people that know me and those who have read my posts on this forum know that I am a capitalist. Truth be known, I think it should take more than the ability to shift gears and enough credit to acquire a truck to be able to start a trucking business. It is the neverending cycle of these shoestring startups coming into the industry and failing within a few months that keep frieght rates depressed. When the bills come due, they get desperate for a few bucks and do things that they absolutely shouldn't do(haul frieght WAY too cheap). They end up cutting their own throats along with everyone else's and end up broke a few months later. If people would take the time to educate themselves and do their due dilligence, they would have a much better chance of prospering. That is where my competitive advantage lies. I know how this ruthless little game is played and I know how to run a company more efficiently than most other carriers of comparable size.

Anyhow, I think I have made my opinions clear and thus I will step back from this debate rather than to rehash the same info repeatedly. The only thing that would accomplish is to show even more people how much of an arrogant jackbutt I really am.

To the original poster; Good Luck to you in your new venture and just remember, just because "everyone" else does it, that doesn't mean that is the only way to do it.