Quote:
Originally Posted by trucker cuma
Quote:
Originally Posted by GMAN
That is where factoring can come in handy. You lose some of the profit, but have the cash flow until you can build your reserves. Cash flow has put a lot of people out of business. There are factors who have a non-recourse agreement. In other words, they buy your receivables, usually at a higher discount rate, but assume all the risks. If the shipper or broker fails to pay, you still have your money and they cannot charge back anything to you. Some factors have a lower rate, but you can still be charged back if the shipper doesn't pay by a certain time. I have one with whom I deal and they charge 5%. I have my money within 1 day from when they receive my bills. I like them because I don't have to factor all my receivables. I only send them what I want. Some factors require you to send them a minimum amount of receivables each month and have minimum fees. You need to be careful when signing with a factor. Some have some very restrictive clauses and hidden fees. I don't factor everything, so this factor works well for me. I can stop factoring a receivable at any time. Whether you like the idea of factoring or not, it is a way to free needed capital to run your business.
I believe this is very valuable information.That`s I would like to ask some questions.
is factoring (a non-recourse agreement) sign between trucker and shipper/broker?
Basically, how it is work?
You lose some of the profit! Where the money goes?
if anything happen like not to receive your money then what its going to be?
There are a couple of ways a factor works. First is the non-recourse factor. If the factor fee is 5%, then they advance all of the money for a particular invoice except for their fee. For instance, let's say you want to factor an invoice for $1,000. After you deliver your load you put your bills in a TripPak envelope and drop it at any truck stop which has a pickup. The factor receives the bills the next day. They can either wire the money into your account, give you a comcheck number the same day for an additional charge, or direct deposit directly into your back account. I prefer the direct deposit. It takes another day but you don't have to worry about it. The wire transfer involves an extra fee of about $25. There could also be a fee attached to the comcheck. These extra fees are in addition to their regular charges. There is only a $1 fee to direct deposit. As I stated, the bills are $1,000. The factor fee is 5% plus $1 for the direct deposit. The day after the factor receives the bills you should have a deposit in your account for $949. So you drop the bills today, the factor receives them tomorrow and you have money the following day. Two days after you drop the bills the money is in your account.
The second type of factor charges a lower fee, but will charge the bills back to you after a certain point if the broker or shipper fails to pay them. They usually advance about 80% of the total amount. Some may advance a little more. Fees range from about 1/2% up. I know of one who charges 1% per week. The longer a shipper or broker takes to pay the higher the fees. There could also be additional fees, depending on the factor.
When you deal with factors it is the credit of the broker or shipper which is what they are interested. The positive aspect is that you don't jeopardize or risk your personal credit or use up a credit line. The down side is that you will give up some of the profit. Factoring should not necessarily be a permanent way to finance your business. It is always best to operate on your own money rather than having to give some of it away to a factor. It is a way to help grow a business with little or no risk, depending on which type of factor you decide to use.
Some factors have minimum monthly fees or amounts of receivables which they require in order to do business with you. Some require you to factor all of your bills with them. I prefer only factoring those which I want to factor and none if that is what I decide.
