Quote:
Originally Posted by GMAN
I have never had a problem with the factor that I used as long as the paperwork has been in order. The problem with some of the recourse factors is that they can charge you a weekly fee for each week they wait until they receive payment. I looked at one that charged 1% per week. Consider the time it may take for them to receive your bills, invoice and mail time it could take up to 10 days for the broker or shipper to receive the bills after delivery. Many operate on a net 30 days to pay. If they pay as agreed then it could take another week or so for the check to get back to the factor. It could take a minimum of 45 days for them to receive payment from the time you delivered the load. If a factor charges 1% per week then it could cost you 6% with this particular factor. If payment doesn't come for another 2 weeks then you could be looking at 8%. Some of these recourse factors will charge back an invoice to you after 60 days. It has been some time since I have looked at a factor but if there are some who charge perhaps 1% per month then it might be a good way to go as long as there are no other hidden fees. Recourse can work for you as long as the broker or shipper pays quickly. Personally, I prefer the non-recourse. That way I don't have to worry about it. I send in the bills and get my money. With the recourse you may not know exactly how much you will pay until the factor receives their money. Non-recourse I know exactly how much I need to pay. If I were you I would check around with different factors and go with the one you are most comfortable. Terms and fees can vary from one to another.
This is the main reason I don't like factoring agreements. the factoring company starts counting the 30 days on the day they pay you, but brokers don't start the clock until the day they receive the BOL in the mail. Not only that, most brokers run their payables once a week. They gather up all the invoices that reached 30 days during the previous week and print all the checks on, say, Tuesday. So if your invoice hits 30 days on a Monday, the check gets printed and mailed on the following Tuesday. That adds another 8 days on top of mailing time. And the factoring company adds fees for that extra time.
And if you have a 5% non-recourse agreement that lets you choose which BOLs you want to factor, they still have an implied lien on the bills you DON'T factor. That could get messy if you have a dispute.
If you can afford it, your better off not factoring.