FACTORING ?
 

Hey folks,

Im new to the trucking industry and never used a factoring company before. Im considering using Apex Capital Corp. for there factoring and fuel card services.

Any comments or complaints on their company?

If you need to factor look at your business bank first. If they do this, the rates will be cheaper. Many factoring companies are nothing more than payday loan sharks.

Re: FACTORING ?
 

If you are thinking about getting your authority, the last question you should be asking, is about factoring.

If you already have your authority, then only use a non recourse company.
The only one I know of is D&S, there may be others.

None recourse means, that you are not responsible, if the broker does not pay.

Also use factoring sparingly.
I would take quick pay before I would factor.

Reputable brokers, will have quickpay avalable.

I agree with hoohaa on the non-recourse factoring. If you plan on factoring it is often less costly to go with a non-recourse factor. You need to read the contract very carefully. Some of the recourse factors can charge as much as 1% per week until the invoice is paid. You could wind up spending more for the factor fees with recourse than the other way around. D & S is one of the better known non-recourse factors.

Some brokers do offer a quick pay program. Rates can range from 1-8% or possibly more.

Quick pay is just another term for non-recourse factoring. Same thing

It is not uncommon for many industries to offer a discount if payment is received more quickly. For instance, there are companies who regularly offer a 2% cash discount for prepayment or if payment was made in 7 or 10 days from the date of the invoice. There are a few brokers who will pay within 24-48 hours for a 1-2% discount. If you need the money it is a good way to keep the cash flow going without giving away the farm. I would not pay any more than 2% for quick pay. If I had to pay more than that then I would factor the receivable.

Don't you just love the fact that the brokers charge the carrier extra to get your money quicker??? It's all crap,..these morons should pay as soon as delivery is completed.
I will only use a factoring company if I suspect the broker is a scab and has a poor pay history. Always go for non-recourse,...so you don't get back charged 60 days later,....when the scab broker who already got paid,......pulls a chew n' screw on you the carrier.

I have a couple of people with whom I do business who sit down and write me a check when I present them my bills. I just picked up a check from one today. There are no discounts on either of them for paying quickly. The other guy will cut a check the day he receives my bills. He will either mail the check or if I want to pay for over night delivery he will put it in a FedEx or UPS envelope for me.

I have had a few brokers whom I have hauled military freight. Some want to charge as much as 8% to pay in about a week. The military pays within 24-72 hours. If you don't pay the quick pay fee then they want to hold your money for 30 days. That is ridiculous!!! I don't mind paying 1-2% if I can have the money in my account within 48 hours, but won't pay any more just to get my money early. If I need the money earlier then I will factor it and give the factor the 5% rather than give it to the broker.

I agree, I think these people need to pay the haul bill COD. It would really simplify things. I doubt that most brokers could stay in business if they had to pay the haul bill upon delivery.

Exactly Gman,..I have one shipper I haul for who pays me the moment I deliver,....I fax her the signed BOL and a check arrives at my home 4 days later. Then I drop the origional BOL in the mail to her and start over again. I also haul military loads and the broker takes 5% and then wires the money into my account within 24hrs.
I dont get why the brokers hang onto the money for up to 8 weeks. I personally won't haul for that kind of broker,...or I will non-recourse factor them,...just because I don't trust them.
I tend to lean towards the brokers as the biggest problems in the trucking industry,..even more so than high fuel and insurance prices.

Ok, good info. Looks like no one really loves a broker or the fees. Im hoping to get enough cash reserve established to not need the quick pay or factoring companies, but might not have to much choice at first.

Ive been looking into CH Robinson which offers quick pay at a 1.5% fee.. How do you guys feel about that company??...do they pay well?

Ive been looking into CH Robinson which offers quick pay at a 1.5% fee.. How do you guys feel about that company??...do they pay well?

Back to top




Ch robberson pays well when they really need a truck.

Where I come from, it's called being a thief! :evil:
That broker is making interest on that money.
Interest you could be making.

Good advice.

Ive been looking into CH Robinson which offers quick pay at a 1.5% fee.. How do you guys feel about that company??...do they pay well?


CH Robinson's money is good, by that I mean you will not have to worry about getting paid. As far as paying well, they are like any other broker. They will start out at the very bottom rate, if you jump on it (Your Bad) they will surely give it to ya. If they need to move a load ,then the ball is in your court, what you do with it is up to you.

Advice: Figure out what rate you need to make a profit and stick with it. Normally you can get that rate, although it will take some negociating. If not and you miss the load, So What, if I cant make what I need on it, I Dont Need IT.[/url]

I think the whole recourse vs non-recourse is a bit overblown. Depending on the amount, I am starting to lean towards a recourse factor. (not for me mind you as I don't factor enough)

For instance, I set my friend up with D&S factors. Admittedly things were getting tight for him with the increase in fuel. It's a lot harder to wait out for better rates if you have 14 drivers in trucks. They might not understand the wait times. Further I've found some wasteful spending which we are now trying to correct.

Anyway for the first month he did about $70,000 and the fee for the month was about $3500. I am now switching him to a recourse which will have him pay 2.5% instead of the 5%.

As for the recourse, if you do what you are supposed to do, that is check people's credit before you haul a load, then the recourse vs non-recourse shouldn't be an issue.

By the way full disclosure, I just signed up to become an agent for a factoring company. But they are looking for carriers that factor a large amount so I'm not trying to sell anything but just that I'd be open about that.

Merrick,

Can you clear up something I heard about factoring. I was told by a banker that non-recourse doesn't mean you're off the hook if they don't pay.

He said it means you still owe them but, they take it out of future invoices instead of the one that didn't pay. They also file a UCC lien against your business. Does this sound right?


BTW...iced coffee is now in CA at McDonalds.

Someone on this forum had a real bad experience with a non-recourse factor. Think it was D&S. If I remember correctly, D&S took the reserve when a broker didn't pay. The trucker complained, they stated that non-recourse only covers an invoice(s) when the broker files for babkruptcy. If he just closes his doors and disappears, your SOL.

Joymax_Trans2

Senior Trucker


Joined: 17 Mar 2006
Posts: 121

Posted: Thu Oct 18, 2007 9:27 am Post subject:

ncnewbie,

There was no contract. So the answer to Q1 & Q2 is NO.

I also received a real good understanding of what is meant by non-recourse. There is non-recourse if there is a credit issue with the broker. Let's say the broker filed for bankruptcy - then there is non-recourse to the Carrier. If that is not the case and they are still doing business but just not paying the factoring company then the factoring company can seek payment from the Carrier.

I was under the impression that is was best not to sign a contract but in reality if you are going to deal with a factoring company, seek one using a contract because everything is spelled out and there are no grey areas. With no contract - you have no idea what's going on with the factoring company, legal or unlegal.

Well Dispatch_This has this right. What a fallacy this non-recourse this is. I'll tell you how I just found out too.

First off the company I am an agent for is a recourse factor. However just a moment ago I logged in to see if a bill I factored with D&S was paid. It said it was short paid $50. I called up to see what happened next and sure enough they said it would come out of my next settlement. I asked what non-recourse was and she said what Dispatch_This wrote.

Basically she said that if it's any type of paperwork issue then we will be charged for it but only companies going out of business would be a non-recourse.

As for the UCC lien, I would say that is right too as I saw something to that effect on my business credit report. In the end I guess this non-recourse things is highly misunderstood. 5% is quite a bit for a semi-recourse factor.

By the way, I called the company that short paid me and they apologized and will be sending out the money.

Glad to know also Bigmon about the iced coffee but I heard it was still only in the 60's there; they need to bring up the temperature before I go back there. :)

Factoring all your frieght bills through non-recourse could easily cost you $15-20,000 a year right off your bottom line. 5% on each invoice works out to an APR of around 72%. That's insane.

When we do factor, we use Sunbelt Finance which a recourse factoring company. Our fee is 1% every 10 days. Our shippers and brokers are paying on avg of 18 days. We receive rebate checks the first week of the month. Just got one today for $400.00. At 45 days we would still only pay 6% but so far it's been under 2%. I also pay close attention to what brokers & shippers I do business with. The key to working recourse is to work with as many different brokers as possible therefore your money is not tied one company. Sunbelt recommends doing < 5% business with each broker or shipper.

Dispatch_This, could you help me figure this out. (Or no_worries I know he's good with this too)

For instance if the factor fee is 2.5% what would be the APR and how do you figure this out?

Also so you are paying like 8% on a piece of equipment, would it be better to factor and get the cash and then just pay cash for the equipment?

Assuming the fee is 2.5% on "30 days out" (normal terms) all you have to is multiply 2.5 x 12 months.the APR is 30% in this case.

Non-recourse at 5% would be a 60% APR based on 30 days out.

If you want to work up a business plan that estimates how much it would cost you to factor, it gets a little more complicated.
The formula would look like this:

Factoring rate x (365/ "days out" agreement) x what your average receivables balance would be if you DIDN'T factor.

It's simpler than it sounds.

A typical one truck independent might have $25,000 out on average, if he didn't factor.
Using your terms 2.5% x 12= 30% x 25,000= $7500 a year in factoring costs. Non-recourse at 5% would be $15,000 a year. Not a good deal either way!

Hope this helps.

Thanks Dispatch_This. We found a place that does it for supposedly 1.3% and I was thinking how would they do that but 1.3% is 15.6% APR and if you have a boat load of cash, a 15.6% return is not a bad investment. No wonder so many places offer this service.

Of course over 30 days brings down the APR if I understand this right. The 4 bills I have factored and they have been paid with D&S were done in 38,46, 20 and 34 days.

So based on 46 days at 2.5% if I understand this right now that would be roughly 20%. (365/46 = 7.93 * 2.5 = 19.83).

Seems to me that if you need money to run things, better to get a line of credit at 8% or so and then use that.

Thanks again Dispatch_This; I appreciate it.

Provided that D&S doesn't bump you up to a higher rate if the broker takes more than 30 days to pay- You nailed it.

This math is not very accurate. if you were paying 5% per month on the total amount you were going to factor for the entire year, then the math would be good. But follow me on this and see if it makes sense. if the factor rate is 5% or 1.5% or whatever, that is actually the effective APR. If I have 10,000 a month that I factor at say 5%, my factoring costs would be 500 per month. In 1 year I would have factored 120,000 and paid 6,000 in fees. Which is still 5%. This is because it is a 1 time cost for each item I factor. Now if the factor company gave you all 120,000 for the entire year up from and then charged you 5% each month on that balance, then the math you put out there would work. The same is true for things like sales tax. If I purchase the same items every month and pay 8% sales tax every time, I am not paying 8% times 12 or 96% in sales tax. I am just paying 8% sales tax. Just wanted to clear that up. Thanks

You're factoring(borrowing) 10-12,000.00 per month over and over again. The math is right.

BigRich,

I have been factoring with Apex Capital for over a year now. I'm VERY satisfied with them. They have great customer service, a excellent on-line credit check system, and an EFS fuel card with a nice discount. My monthly fuel discount is always more than my factoring fees.

I'm set up on recourse, I check credit before I book a load and I'm good. I have not had any unpaid invoices.

There are always people that say you should not factor. If it works with your business model and you can be profitable, don't be afraid of it.

Shoot me an e-mail if you have any more questions. [email protected]

Good luck

-scott

That's an interesting arrangement. Because Apex has so many cards out there buying fuel they get a discount that thet inturn give to you. The fuel discount is equal to or greater than their factoring fees. Seems like a win/win for you as you get better than cash price buying on your fuel plus you receive free credit checks. Are you obligated to factor all of your receiveables through Apex or can you pick and choose?

It has worked out good for me. Every agreement with them is different, they typically have a monthly minimum. You don't have to factor 100% with them. The fuel card is great!

Thanks,

-scott

BigDiesel is right. By far an account with your business bank will cost much less than factoring. I had what my bank called a revolving acct. I could just write checks (supplied with acct.) and every month the payment due to the acct. was far less than what I would put back in. In other words if I used $10,000 in the month the payment due might be $816. Naturally I would try to put back what I used and disregarded the amount due. I once figured over a one year period how much this was costing and it was less than 1% and that was when interest was at a much higher rate. In a way your doing your own factoring thru your bank. As far as recourse goes, know your customer or check their credit.

I have been using a factoring company for 2 years now. And I say this based on experince: STAY AWAY FROM BIRD DOG/FOLEY SERVICES

you OTR guys cry about waiting 20 days or so to get paid lol. Dont buy a dump truck. Most of the time its 45days. Alot of people are 60. The longest i ever had to wait was 108days. I would love to get paid with in 30days. That would be great. Now when i work for the quarry they pay once a week. Its the contractors who you have to wait on.

Why go for Apex Capital Corp or some other organization straight away? I suggest you should spend some time shopping around and pick the best option only after doing some research. It’s also a great idea to ask your business bank if they can help you out.
Since you are already associated with them, you can expect them to offer you reasonable rates (if they are providing factoring solutions). Some factoring companies will, contrary to that, want to make as much money with you as possible. So, avoid giving them business so easily! There’re some exceptions though (the kind that are even better than banks).

Just like not all companies are the same, same applies to factoring companies. I am an agent actually for a factoring company (minimum of 5 trucks) and they are honest. They always wanted my own business as well but they always told me that they would love to have my business but if I can make it without them it's better. You can even in lieu of a reserve put a deposit down. For instance for me if I wanted to, for every $100,000 they want $5000 for deposit. Honestly sometimes I want to, I'd love to have the money in my bank than have so much owed to me. A bird I the hand...

But anyway check your credit with brokers/shippers and at least you'll be covered on that end.

Too many carriers don't know the right questions to ask and too many factoring companies will tell you what you want to hear to get your signature.

Factoring is a readily available solution to your cash flow crunch. Whether you’re waiting 30, 60, or even 90 days to get paid there is a freight factoring company for you. Check out some of these other benefits from the factoring companies we work with:
• Flexible Funding Structure
• No Required Term Contract
• Fast Approval - Usually Within 48 Hours
• Improve and Increase Your Cash Flow