Factoring Companies

[Jim L]

There has been a bit of chatter about Factoring Companies on this site. I thought it would be best to start a clean thread because some of the other threads are specifically mentioning certain companies or names.

I am very leery to use a factoring company because I feel that the data that we provide is way too valuable if it ends up on the wrong desk. Of the few factoring companies that have courted me I have found out that they need my invoice, POD and any other documentation used for the load. This infomation is gold to any other of my competitors. Remember if a competitor knows what is shipped, frequency and current rate they can come in just below your price everytime. I feel that if they give it out, even though they swear confidentiality, what can you do? Sure you can take them to court and by the time you get a judgement the factoring company has moved on. How do you put a number on the lost sales in an industry where shippers move carriers all the time?

I am also concerned about the companies using factoring. How can they do with 3-7% off the top line? Does this process of sending the invoices to the factoring company and having the factoring company collect actually help? On a company with 1 million in sales that equates to $50K at 5%.

I'm interested in hearing the other side of the story.

 

[Factor]

There has been a bit of chatter about Factoring Companies on this site. I thought it would be best to start a clean thread because some of the other threads are specifically mentioning certain companies or names.

I am very leery to use a factoring company because I feel that the data that we provide is way too valuable if it ends up on the wrong desk. Of the few factoring companies that have courted me I have found out that they need my invoice, POD and any other documentation used for the load. This infomation is gold to any other of my competitors. Remember if a competitor knows what is shipped, frequency and current rate they can come in just below your price everytime. I feel that if they give it out, even though they swear confidentiality, what can you do? Sure you can take them to court and by the time you get a judgement the factoring company has moved on. How do you put a number on the lost sales in an industry where shippers move carriers all the time?

I am also concerned about the companies using factoring. How can they do with 3-7% off the top line? Does this process of sending the invoices to the factoring company and having the factoring company collect actually help? On a company with 1 million in sales that equates to $50K at 5%.

I'm interested in hearing the other side of the story.

You are being misinformed on a lot of issues. First, factoring companies DO NOT disclose their client's confidential information. Second, the rates are not what you mentioned - going rate now is 2.99% for 90 days. There are ones that offer 1.69% for 45 days with 97% advance.Third, the companies that are using factoring are way bigger that you might even guess - $2 million a month in A/R factoring is not an uncommon thing. The rest is up to you to decide.
I find this website to be truly hostile to factoring companies.

 

[Jim L]

You are being misinformed on a lot of issues. First, factoring companies DO NOT disclose their client's confidential information.

Granted, maybe you don't, but I can definitely see the possibility. I suggested to one factoring company that I only send my weekly AR amounts and they would not accept it. I don't blame them as I can make up any numbers I want.

Second, the rates are not what you mentioned - going rate now is 2.99% for 90 days. There are ones that offer 1.69% for 45 days with 97% advance.

The factoring companies that have approached me have been between 3-7%.

I find this website to be truly hostile to factoring companies

This website is a valuable tool for discussion of exactly these issues and I am glad that you contributed to it. You have your opinions and I too have opinions. Together we can provide all aspects and let the chips fall where they may.
I understand that factoring companies are tools that are used by companies but for me I am still leery to use them for the simple fact that the data we provide is way to valuable for me to let go.

 

[Paul S]

Nothing bad has been said about factoring companies, not sure why your being hostile to this website forum, I personally have great experiences with factoring companies like AVA Financial, Atlantic Gateway, IPS, Accutrac capital, if I am forgetting other names I apologies.

 

[MikeJr]

You are being misinformed on a lot of issues. First, factoring companies DO NOT disclose their client's confidential information. Second, the rates are not what you mentioned - going rate now is 2.99% for 90 days. There are ones that offer 1.69% for 45 days with 97% advance.Third, the companies that are using factoring are way bigger that you might even guess - $2 million a month in A/R factoring is not an uncommon thing. The rest is up to you to decide.
I find this website to be truly hostile to factoring companies.

I love factoring companies, they perform a critical function for some of our suppliers. I know good people that work at good factoring companies. Just like every other industry, there are first rate factoring companies (I've listed several of them over the years on this site) and there are scummy ones who prey on their customers, take the majority of their profits on bulls--t fees and when it's time to close their doors, take even more blood by means of the personal guarantee signed by officer(s) of the company.

Happy afternoon thoughts!
Mike

 

[loaders]

As Jim L said, factoring companies are tools that some firms use to help run their business. If the majority of my clients were consistently paying me in 60 to 90 days, then I might consider the use of a factoring company so that I could pay my suppliers within their 30 day terms. Yes, a move like that would come with a price attached.....the factoring company percentage. Fortunately, the bulk of our clients pay within 30-40 days, allowing me to keep our suppliers invoices current. In addition, we employ a very thorough and persistent AR person, which I'm sure accounts for our good aging reports. One thing about this forum Factor, discussions can get heated and people do feel very passionate about some things, however, at the end of the day, we can agree to disagree and still keep things civil, at least most of the time!

 

[AccountsReceivable@DRC]

I find this website to be truly hostile to factoring companies.

Factor

As you are a new member to this site - thought I would set a few things straight here:

First of all - as per your comment - we have 3 long term members actively on this site that work in factoring. These same members support our forum and what we are trying to accomplish here. They certainly would not be here 3-5+ years - making informative & knowledgeable contributions for all our members - if this forum was 'hostile' towards the industry they work in daily.

Secondly - you are more than welcome to be here and join providing you are making worthy contributions to this site. Joining Inside Transport - then immediately 'ticking' off some Senior members - isn't going to make you any new friends.

Lastly - your 'word' is your 'word' here. Majority of us all go by aliases - for many different reasons. The more you are on the board and make worthwhile contributions - the more 'your word' becomes a viable source of trustworthy information for others. Your reputation gets built here much like a house. Start with a good and solid foundation that not only YOU but OTHERS can trust and benefit from. The rest falls into place and your reputation then becomes established.

I've noted this to advise you are certainly not off to a good start. I will be monitoring your 'contributions' closely and hopefully will not need to mention this to you again.

I hope to see some valuable postings from you in future. Good Luck.

 

[lowmiler88]

Well apparently I'm not the most educated and well brought up person in the world but there is definitely one thing I do know and that is an a**hole when I hear one.

 

[AccountsReceivable@DRC]

Back to the original topic here and Jim L's original post.

Going forward - ONLY reply regarding the original thread on Factoring. All others will be deleted and/or the thread closed off.

Thank you

 

[Gord M]

In thirty years in the trucking business I've worked for two companies that factored their invoices & both of them eventaully went bankrupt. There is a very small margin in trucking (less than 5%) net profit is standard. If you give away a big portion of your profits, there isn't any money to grow or re-invest. It's simple - if you rob Peter to pay Paul, eventually you have to find the money to pay Peter. If there is a month or two where you need to factor some invoices then by all means, but if factoring is a daily occurence then you don't have sufficient financing in place to run a trucking business. You need help at the core of the business and shortening up the receivable cycle and receiving quick cash won't help long term.

 

[Factor]

In thirty years in the trucking business I've worked for two companies that factored their invoices & both of them eventaully went bankrupt. There is a very small margin in trucking (less than 5%) net profit is standard. If you give away a big portion of your profits, there isn't any money to grow or re-invest. It's simple - if you rob Peter to pay Paul, eventually you have to find the money to pay Peter. If there is a month or two where you need to factor some invoices then by all means, but if factoring is a daily occurence then you don't have sufficient financing in place to run a trucking business. You need help at the core of the business and shortening up the receivable cycle and receiving quick cash won't help long term.

In 10 years in the factoring business I've seen quite a few trucking companies that graduated to the bank after having used factoring companies for at least 3 years. But I agree, if a trucking company is not watching its bottom line it is sure going to bankrupt itself.

 

[MikeJr]

In 10 years in the factoring business I've seen quite a few trucking companies that graduated to the bank after having used factoring companies for at least 3 years. But I agree, if a trucking company is not watching its bottom line it is sure going to bankrupt itself.

That is always great news to see! While a factoring company isn't thrilled to lose a client, they were there to offer their services during a time that the client needed. One of the carriers that we give a fair portion of our business to is in the throws of transitioning to non-factoring. They are a carrier with a niche market, they demand a slight premium for their services and can afford to do so as for portions of what they do there is little to no competition and the inflated price afforded them the extra income needed to factor. The good news for them is that switching to being self financed will not change the price they demand and receive.

Keep well,
Mike