FACTORING COMPANIES

[Google jr]

not sure this is in the correct spot.. but here it goes

Can someone explain to me the reason that when I broker a load out, and the invoice is sent to a factoring company the guys call here/email constantly to get info on what we paid the carrier.
My understanding is they take whatever percentage (what is that percentage?) to 1) assume the risk in laying $$ out to the carrier that did the load, and 2) for the short term borrowing of the money.

By these guys calling/emailing to verify rates, deductions etc. does that not eliminate 50% of the reason they are taking their percentage to begin with? I feel like asking these guys for a few points every time they call and ask for rate verification.

Anyone else encounter this?

 

[Freight Broker]

They do this because they advance the carrier the money for the load.. thus they need to know about any problems or advances ahead of time.

 

[jackhole]

They do this because they advance the carrier the money for the load.. thus they need to know about any problems or advances ahead of time.

They keep calling here too asking questions about the rate etc. How is this our problem in any way, shape or form. We have much better things to be doing than worrying about a Factoring Companies outstanding invoices. We trust our Carriers to do what we ask , if they want to factor the invoice that has nothing to do with us.

 

[MikeJr]

There are only one or two factors that call and ask these kinds of questions. I do think I've narrowed it down to:
Their newer customers, perhaps for the first x number of shipments.
Customers of theirs that for some reason they are auditing.

It's not all shipments, and I'm glad it's not. Who has time for that?

Keep well,
Mike

 

[Jim L]

Just tell the factor that you do not pay factoring companies and that you will pay the carrier directly. When the factor sends you the notice of assignment send them back a letter stating that you pay your vendor directly and not through a 3rd party factoring company. You'll probably get a call immediately from the carrier and you can work out something directly with them. You can also offer a quick pay option to the carrier if you like the carrier.

Remember, the factoring company probably already gave the money to the carrier and they want to make sure that you have no issues with payment. If you choose to work with the factoring company you will find that most report your payables to Equifax and D&B. If you want to stay on the good side of those reports you better make sure your payables are paid in a very timely manner. Also keep them in the loop for any issue. If you find that something might be double brokered, contact them quickly.

 

[Freight Broker]

I don't mind having factoring companies call to followup.. to me it shows they're on the ball... so much can go wrong. Some of the largest American factoring companies followup on each and every load.. D&S Factors.. Apex.. Interstate.. they all do. The advantage of factoring (for brokers at least) is that it opens up a universe of carriers.. i.e. if you're "factorable" then you're basically good to go with any carrier that uses that factoring company. Imagine how cumbersome it would be if every carrier had to check out each broker's creditworthiness. As it is all they have to do is look for the thumbs up from their factoring company, and away we go.

 

[Henry]

If you do not want to deal with factoring companies, or a specific factoring company, write it in your load agreement that the invoice can not be assigned.

I have one factoring company i refuse to deal with now. My carrier agreements say 45 days. The factoring company wanted 30 days.

 

[loaders]

Henry, I have to ask, you stretch your suppliers to 45 days to pay, do you extend those same terms to your customers as well? Like the factoring company you referred to, do you not want your customers to pay you in thirty days? Just curious.

 

[Henry]

No, i try to get paid in 30 days. I have clients that pay at 60 also. 45 days are my terms.I tell my suppliers up front.

 

[Henry]

Henry, I have to ask, you stretch your suppliers to 45 days to pay, do you extend those same terms to your customers as well? Like the factoring company you referred to, do you not want your customers to pay you in thirty days? Just curious.

Henry, I have to ask, you stretch your suppliers to 45 days to pay, do you extend those same terms to your customers as well? Like the factoring company you referred to, do you not want your customers to pay you in thirty days? Just curious.

I believe if a carriers sells their receivable to a factoring company, the assignee still need to adhere to the contractual terms.

 

[loaders]

I would be curious to hear what a factor would say about that. For example, you mentioned you have clients that pay you in 60 days. If you were to sell those receivables to a factor, would the factor have to wait 60 days to receive their money? Maybe, but I am sure the discount they would offer you would be greater than say a 30 or 45 day receivable. Or maybe they wouldn’t buy such a receivable at all, having to wait 60 days. So the question is, does your contact or agreement with your customer regarding payment terms transfer over to the factoring company when they buy your invoices?

 

[KeyFactor]

I would be curious to hear what a factor would say about that. For example, you mentioned you have clients that pay you in 60 days. If you were to sell those receivables to a factor, would the factor have to wait 60 days to receive their money? Maybe, but I am sure the discount they would offer you would be greater than say a 30 or 45 day receivable. Or maybe they wouldn’t buy such a receivable at all, having to wait 60 days. So the question is, does your contact or agreement with your customer regarding payment terms transfer over to the factoring company when they buy your invoices?

@loaders, once again, you're spot on. Unless we're talking about a flat rate structure, we're going to charge proportionate to the payment delay. In a perfect world, the confirmation contains agreed upon payment terms, but we usually receive confirmations with no such terms and invoices with net 30 terms. We have to call the customer to confirm and this introduces delays to funding. I prefer everything to be clearly stated on the confirmation; we'll still have to call, but at least there are no surprises.

 

[Henry]

I agree, i believe the factoring companies charges, are higher the longer they have to wait. That would be reasonable.

And i believe the factoring companies have to follow the contract that was initially signed, ie 45 days.

 

[loaders]

I am sure they would follow the terms of your original contract, but as Key Factor stated, at a higher cost to you, the seller of the invoices. One has to wonder if you would be better served to offer your slow paying customer a “quick pay” discount, similar to the discounted rate the factor offers you?

 

[Henry]

I have looked into that. Most of them want 5 percent discounts , which eats in to the profit.

 

[loaders]

So to borrow a phrase from Key Factor, “in a perfect world” we would charge our slow paying customers a slightly higher rate than those that pay their invoices within 30 day terms. This slightly higher rate would cover the discount if their invoices are factored, or make up the quick pay option, without as you say eating into the profits. Another one of the many benefits of the “perfect world”!

 

[KeyFactor]

I have looked into that. Most of them want 5 percent discounts , which eats in to the profit.

The customer may be factoring themselves, so their Quick Pay discount reflects their own factoring costs. In any case, you can always try them to see how long their payment delay turns out to be with or without Quick Pay and then decide on if you want to factor them....if your factor permits such flexibility.

 

[economy]

On behalf of the factoring company, please allow me to clarify some things subject to Assignments, Terms, Relationships:
1. Assignment - the choice to Assign the invoice (receivables) belongs to the carrier and only the carrier. Once invoice is assigned, the payable party is notified of it and there is NO CHOICE to the debtor but to honour the assignment and remit the payment accordingly to the assignee (Factoring company). Ignore the assignment and you might end up paying the invoice for a second time. There are number of court judgement making brokers and other business entities paying for 2nd time. The words WE DO NOT PAY THIRD PARTIES FACTORING do not overrule the Assignment! Those words only indicate of the operator/s not having the knowledge of the industry they are in.

2. Terms - when you offer some payment terms, it is actually up to the carrier or factoring to allow the CREDIT to the party that brokers the freight. Highway Traffic Act states: If required by the carrier, the freight and all other lawful charges accruing on the goods shall be paid before delivery. Therefore, considering the payment terms is actually to consider to allow the credit. We are all allowing/accepting certain credit terms for the purpose of building the long term business relationships.

You do not have to take my word for it, consult your trusted legal representative on the subject. Not here to argue the points also.

 

[loaders]

Agreed economy. I also think we all agree that offering your customer terms, whether they are a freight broker or shipper is pretty much mandatory. Telling your shipper that they have to pay before delivery will ensure that it is a one-time shipment for you.

 

[wesward]

Thank you for all information it helps