Home > Forum > TO FACTOR OR NOT TO FACTOR, THIS IS THE QUESTION

TO FACTOR OR NOT TO FACTOR, THIS IS THE QUESTION

Jan 09, 2017 at 04:43 PM CST
Is there anyone out there that uses a company to factor? What is your experience with factoring?

Thanks!
Replied on Mon, Jan 09, 2017 at 08:41 PM CST
You can give smart freight 5% and never have to worry about getting paid and your money is in your back the next day
Replied on Mon, Jan 09, 2017 at 08:42 PM CST
Bank
Replied on Tue, Jan 10, 2017 at 07:38 AM CST
We use Smart Freight Funding as well, it's nice not having to worry about if you will be paid. The ladies have always been right on top of things and money is always deposited the next day.
Replied on Tue, Jan 10, 2017 at 10:20 AM CST
Originally Posted by: GLEN DEAN
Quote: "Bank"

Are you suggesting we go to our local "bank" and ask them to factor? Not understanding the "Bank".
Replied on Tue, Jan 10, 2017 at 10:20 AM CST
Thank you!
Replied on Tue, Jan 10, 2017 at 12:54 PM CST
I have to agree Jenny,Kristin,Sarah at Smart Freight are "Great". Not to leave any out they have all been Great. Another plus with Smart Freight is the fuel card. I myself always buy were I can get it the cheapest. This has always been the smaller places. With the fuel card I'm getting cheaper fuel at the flying j,TA and this is taken out of your funding eliminating the need to carry hundreds of dollars in cash or credit cards. Send in your bills and the money is in your account before the bank opens the next day available to cover your bills.

Now example for Bank or Factoring
My wife goes to the bank and borrows $1500 1st week of December
She pays $500 back the 15th of December
Pays the remainder on the 27th interest in all totaled $1587.00 for 3 1/2 weeks
Considering most pay in 30 days having your money the next day $1500 for $75 from Smart Freight is the better deal not to mention the fuel card and the easiness of getting your money.

I know there's other opinions out there on this subject but this is mine. If pay from customers is fast I send them my bills if not I factor and I if I need quick cash it doesn't get much faster then Smart Freight Funding
Replied on Tue, Jan 10, 2017 at 01:58 PM CST
I think he was fixing his spelling errors in the first reply that he made
Replied on Wed, Jan 11, 2017 at 10:24 AM CST
- 2
I personally think if you need to factor to make it then you are hauling for the wrong people! You take the loads at a fair rate, deliver it in a timely manner, there should be no reason that it takes very long to get paid. Our average turn around is 14 days. I just don't think you should have to pay someone to get your money. And if the shipper does not pay then you will be charged back anyway.

We pay our owner operators weekly as well as our employees. Fair is fair!!!
Replied on Wed, Jan 11, 2017 at 08:34 PM CST
I use Smart Freight Funding... Couldn't ask for anything better... They get 5%.. I receive my funds the next day.. No problems....They treat me good as GOLD...

Replied on Thu, Jan 12, 2017 at 05:43 PM CST
Hi everyone

I am not really qualified to answer my own question but am sure that there
Is probably some mathematical genius that reads this
forum and can answer it.

If you give some one 5% to borrow money for 30 days
how much is the yearly interest?????

Thanks
Replied on Thu, Jan 12, 2017 at 06:06 PM CST
Originally Posted by: ED MCCONNELL
Quote: "I personally think if you need to factor to make it then you are hauling for the wrong people! You take the loads at a fair rate, deliver it in a timely manner, there should be no reason that it takes very long to get paid. Our average turn around is 14 days. I just don't think you should have to pay someone to get your money. And if the shipper does not pay then you will be charged back anyway. We pay our owner operators weekly as well as our employees. Fair is fair!!!"

Ed,

I appreciate your opinion. However, there are some shippers that take 30 days to pay. I agree that if you deliver in a timely manner, there should be no reason that it takes very long to get paid.

I apologize, I don't understand what you mean by "if the shipper does not pay then you will be charged back anyway". I have never faced the issue of never being paid for something we hauled.

I appreciate that you pay yourself and your employees weekly - that is fair and my hat is off to you.
Replied on Thu, Jan 12, 2017 at 07:29 PM CST
+ 1
Originally Posted by: HOWARD RASMUSSEN
Quote: "Ed, I appreciate your opinion. However, there are some shippers that take 30 days to pay. I agree that if you deliver in a timely manner, there should be no reason that it takes very long to get paid. I apologize, I don't understand what you mean by "if the shipper does not pay then you will be charged back anyway". I have never faced the issue of never being paid for something we hauled. I appreciate that you pay yourself and your employees weekly - that is fair and my hat is off to you."

What you guys are talking about is cash flow managment. I have never factored anything and I would encourage people not to factor unless for a very good reason and very limitied basis. Now dont get me wrong factoring companies are not bad, they do provide a service and are entilited to make money.

But if your a single O/O this is the cost of factoring at the 5% rate talked about in this forum.

$150,000 yearly rev : factoring costs you $7500.00
$200,000 yearly rev: Factoring costs you $10,000.00

Put the cash in your own pockets..... Have a great 2017....


Replied on Thu, Jan 12, 2017 at 08:57 PM CST
+ 1
Originally Posted by: BARRY SHARP
Quote: "What you guys are talking about is cash flow managment. I have never factored anything and I would encourage people not to factor unless for a very good reason and very limitied basis. Now dont get me wrong factoring companies are not bad, they do provide a service and are entilited to make money. But if your a single O/O this is the cost of factoring at the 5% rate talked about in this forum. $150,000 yearly rev : factoring costs you $7500.00 $200,000 yearly rev: Factoring costs you $10,000.00 Put the cash in your own pockets..... Have a great 2017.... "

True and the 5% is off your top line gross revenue

$200,000 at 20% is $40,000 profit and if the factor cost $10,000 it's actually costing you 25% of your profits

The 5% sounds low but run your numbers very carefully to decide if you are willing to give up 25-33-50% of your net profit for the financing. You have to look at the fee as an expense off your net not a fee off the top to get an accurate picture
Replied on Thu, Jan 12, 2017 at 10:06 PM CST
How many load does it take not to be paid for to make up the factoring cost.Guys there are plenty of sorry ass brokers out there that still dont pay their trucks.Sorry but its true and im not saying a o\o has to factor all the time.
Replied on Fri, Jan 13, 2017 at 01:57 AM CST
+ 1
Originally Posted by: JAMES CASE
Quote: "True and the 5% is off your top line gross revenue$200,000 at 20% is $40,000 profit and if the factor cost $10,000 it's actually costing you 25% of your profitsThe 5% sounds low but run your numbers very carefully to decide if you are willing to give up 25-33-50% of your net profit for the financing. You have to look at the fee as an expense off your net not a fee off the top to get an accurate picture"

This is it right here.

Go to the bank for a line of credit. $50k at 8% would at most cost $4k for the year. That is assuming it is maxed out for the entire year.

A LOC is on demand, you only get charged interest if you use it.
Replied on Fri, Jan 13, 2017 at 09:42 AM CST
I use Mhc kenworth and they have been good to me so far 2%
Replied on Fri, Jan 13, 2017 at 11:10 AM CST
I think if you read the factoring agreement that any bad debt incurred by the factoring company will be charged back to you. So not only do you pay your 5%, you still run the risk of getting stiffed in the end.

My advice is to either only work with the vendors who pay you in a timely manner or go out and find a reputable company that pays you weekly and will work in your best intrest to make money.

When the load pays X amount of dollars, you should get that amount and not have to pay someone to get that amount. I guarantee that if you work through this on your own without factoring you will be putting vacation money in your pocket each year! Time for people to ge get a repore with their banker and make things work out. You bust your ass to make the money so why pay someone a portion for your hard work?!
Replied on Fri, Jan 13, 2017 at 11:23 AM CST
+ 1
Originally Posted by: ED MCCONNELL
Quote: "I think if you read the factoring agreement that any bad debt incurred by the factoring company will be charged back to you. So not only do you pay your 5%, you still run the risk of getting stiffed in the end. My advice is to either only work with the vendors who pay you in a timely manner or go out and find a reputable company that pays you weekly and will work in your best intrest to make money. When the load pays X amount of dollars, you should get that amount and not have to pay someone to get that amount. I guarantee that if you work through this on your own without factoring you will be putting vacation money in your pocket each year! Time for people to ge get a repore with their banker and make things work out. You bust your ass to make the money so why pay someone a portion for your hard work?!"

There is one thing to remember ladies and gentlemen, it all starts with the truck driver! If the trucks do not go up and down the road then NO ONE makes money! We value our truck drivers and want to make sure that they are taken care of! If they don't make money, we don't make money and we are all out of jobs!

Do your homework, pull for the right people and not just make a living, make some retirment money! If you factor 100,000 per year you will be giving up 2-5000 dollars. That would look pretty good in an IRA, Sep plan or even in your wallet.

It is just my suggestion that you find your home and work with the people who actually care about your well being as well as the companies well being!
Replied on Sat, Jan 14, 2017 at 10:11 PM CST
30 days = 1 month 12 months in a year 5% x 12= 60% annual rate. Giving up a% is like borrowing $
Replied on Sun, Jan 15, 2017 at 12:43 PM CST
No wonder Smart Freight treats them like gold .

They are.

Thanks for that calculation.

Next you could calculate what they make off those fuel cards
they give their customers just cause they are good ol boys.



Thanks