I respect your opinion but I would be embarrassed to expose to my direct customer I was underfunded but I am sure there may be circumstances that would warrant it, personally for me, no chance.
Worse even ... what if one of your carriers ever found out you were factoring !!! You know we all talk on places like insidetransport.com ... LOL.
You would be out of business in a heartbeat.
@KeyFactor ... you are correct that factoring is a form of leverage to be used properly in the right circumstances. In my opinion, brokerage is not the right circumstance.
The biggest question that comes to mind is how would said broker manage his trust fund using factoring to manage his cash flow and cap ex?
Technically speaking, that broker has to put the promised funds in the trust account when the carrier accepts the load. Are you, the factoring company, going to advance the broker the funds based on the dispatch alone? I somehow doubt it as that would be a completely unsecured debt. Suppose that broker dispatches 1/2 a million dollars a week? You're in the hole 2+ million by the end of the month, completely unsecured. Add to that the turnaround on paperwork and ... I wouldn't want to be in your shoes.
The only way for you, the factoring company, to protect yourself is to be a signatory to the broker's trust fund account. That increases the risk that carriers will find out that a factory company supports a brokerage and reveals that he is/was underfunded to begin with. It also adds to the turnaround time on carrier payments. The signed cheque would have to go from the broker to the factoring company for their signature, then back to the broker to be mailed to the carrier. I wouldn't think an EFT arrangement would be in the factoring company's best interest. Truthfully, the factoring company would be better off hiring the broker as a sales agent and becoming the broker themself.
Like I said though, in my opinion, brokerage is not the right circumstance for factoring, simply because I fail to see how it would work. However, if I am anything, it's open-minded, and if I have erred in my judgement, please feel free to enlighten me.