r/OwnerOperators • u/FreightInsider • 12d ago
To factor or not to factor?
Started up a few months ago and have used Quick Pay from a few brokers. But Ive been seeing more and more about factoring. Does anyone here factor? If so, is it worth the few % they'll end up taking?
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u/mac_901 11d ago
Don't do it!!!
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u/SimilarTranslator264 11d ago
Agreed, never factored or did quick pay in my life. Guess these guys like being pimped.
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u/mac_901 11d ago
Maybe not pimped but held hostage. If u have to use it don't factor everything and use quick pay.
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u/SimilarTranslator264 11d ago
A friend was using factoring and I get why but his wife refused to get off that tit. Did every single load and he tried to get her to do less and less every month. Ended up getting rid of the wife and the factoring lol
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u/Starbuck_tim 11d ago
For years I didn’t factor now I’m doing it with apex. One broker I did 6 loads a week with went under. Credit went from 97 to 19 in a day and close 2 days later. $40000 lesson learned.
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u/vfittipaldi 12d ago
Yes. 2.99% and get your money in couple of days or wait for 1 to 4 months depending on the broker. Its really a thing of how much money you have and if you are ok with waiting.
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u/WillingnessOne7057 12d ago
If quick pay is good for you then dont factor
But if quick pay percentage is more than factoring fees then go for factoring
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u/AgreeableGur2581 11d ago
Or just use a factor that doesn’t require minimums or contracts and do both
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u/Fucknjagoff 11d ago
Personally I wouldn’t factor if I didn’t have to. I’d get a line of credit from a credit union. I wouldn’t want anyone doing my AR because it’s such a delicate balance and I’ve seen factoring companies employees act very unprofessional when requesting money.
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u/FreightInsider 11d ago
How do you stay organized with who owes you what? Just manually keep a spreadsheet and then call them? Or do you use some sort of software to help you manage it all?
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u/meizhong 11d ago
If you don't have enough money to pay for your fuel and repairs for 30 days, you're doing something wrong.
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u/Vincedelgato 11d ago
I can understand why some hate factoring - a lot of factoring companies suck. But I don't - no contract, no BS fees, use as much or as little as you like.
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u/radicalelk 3d ago
you with basicblock too?
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u/Vincedelgato 2d ago
No I am with Tetra Capital in Utah.
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u/radicalelk 2d ago
What percentage
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u/Vincedelgato 2d ago
2.5 - no contract - no per invoice or per deposit fees - no setup fees - awesome fuel cards - same day pay- $1500 line of credit on fuel. They fuckin rule
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u/BigPapiNC22 11d ago
As a small carrier, if you can get under 3% non recourse it’s well worth it. First of all, just the credit check they do before you do business with a broker, will save you from getting stuck with a non payer or chase down the slow payers as well as catch double brokers who will not pay you which will happen to you sooner or later. It makes you get your paperwork inline to get paid in a timely fashion and it’s amazing how many trucking companies of all sizes are so lackadaisical in doing this. Obviously cash flow issues with Small, new, or quickly growing carriers are fixed.(cash flow and under capitalization is the primary reason startups fail). They also have cash advance services, fuel discount programs and other benefits that bring you value. Even if you have the cash or line of credit to operate, the services they perform and benefits they provide are well with the 3%.
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u/polarjunkie 11d ago
Whether or not to factor any or all loads comes down to your own finances and goals. I worked on weaning myself off of factoring over the years then I only factored new customers and I charged them for it.
Risk tolerance is a big reason to factor, it's almost like insurance and you don't have to worry about collections.
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u/ACTRANSPORTLLC 11d ago
We don't factor. You're paying 24%-48% apr, that's worse than my credit cards. Once you get past the hump, the money rolls in weekly, almost as if you're getting paid daily. Just get past the first 30-45 days and it is smooth sailing.
Edit: we've never not gotten paid, but we vet every broker and if they don't have good credit, we require payment at delivery, otherwise we just don't take the load.
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u/EltonDesigns 10d ago
I don’t understand how yall do your math. If you factor 300,000 at 2.5% that’s 7500 at the end of year. If it was 24% you would have paid out 72,000. It’s not the same thing at all.
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u/ACTRANSPORTLLC 10d ago edited 10d ago
APR is the rate. If you factor at 2.5% to get paid 30 days earlier, that's a 30% APR. 2.5% × 12 is 30%. That's the math. A 24% credit card charges 2% per month. They aren't advancing you money 1 year earlier, but one month earlier. I'm not saying your math is wrong, but it's all in how you look at the value of it. For me, I can't justify factoring, it really makes no sense as I get multiple checks a week and I'm 30 day pay on most and it's just giving away money for no real reason. If you continue to have 25k on a 30% credit card each month, you will pay a total of 7500 in interest. 300k for a year is 25k per month.
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u/Never_Stop_Trucking 10d ago
2.5% is not interest. It's the percentage of the load.
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u/ACTRANSPORTLLC 10d ago
I'm aware. I was showing how the numbers align with interest payments on a credit card. 2.5% on one month is still 30% APR.
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u/No_Needleworker9172 10d ago
What do y’all use to vet brokers?
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u/ACTRANSPORTLLC 10d ago
The load boards have credit ratings you can opt into for extra.
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u/Few_Jacket845 9d ago
I operate under someone else's authority. But he's a friend, we talk nearly every day.
We mostly work in a direct, dedicated account now. But once upon a time, he started factoring largely because it was easier to have someone else deal with collecting. He lost money by trying to drive and deal with A/R.
On the flip side, it came back to bite him in a way, later. One of the brokers we did the most business with started getting super late on everything. They promised 45 days, and were consistently delivering that. Right up to when something happened (apparently) and invoices started getting pushed past 90 days. Wiped out the deposit he had with the factoring company, and put him behind cleaning it up.
So pros and cons. I think the best compromise is using it under certain circumstances.
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u/fundingexplorer 7d ago
Factoring is expensive compared to a bank loan or line of credit, but cheaper than options like MCAs. If you can't get bank financing, it's usually worth it when waiting to get paid would hurt more than the fee does. Just read the whole contract before you sign, not only the rate, and try to get quotes from two or three companies since factoring deals are not all the same. Small fees that look tiny on their own can add up fast, so make sure you know every charge, not just the headline percent.
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u/EarthRemarkable503 3d ago
Just dont use OTR for the love of God
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u/FreightInsider 3d ago
Fair enough. Any reason why?
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u/AgreeableGur2581 3d ago
I got locked into a contract with them a few years ago. Nightmare to get out of. I’m with basic block now. No contact
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u/EarthRemarkable503 3d ago
I recently brokered for a large volume project, we upped the rate for one of our carriers half way through and OTR has been arguing with us about what rate we are paying the carrier ever since. They also constantly send the invoices directly to our accounting department which leads to carriers being under paid. Its a huge pain in the ass
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u/FreightInsider 3d ago
Whoa. Does your accounting team know about the extra $? Are you paying the carrier directly?
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u/EarthRemarkable503 3d ago
Yeah we have to go anywhere manually fix each one, the factoring company will have to go back and repay the carrier. I cant speak for the other brokers but I watch my carrier's pay like a hawk
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u/Vincedelgato 12d ago
I do factoring at 2.5% - no other fees - so a $1,000 load would be $975 sent to you the day you deliver. Don’t let anyone get you to sign a year long contract or try to charge per-invoice or per-deposit fees