For this month’s edition of Tell It Like It Is, Robert Beard, owner of Pay4Freight, weighs in on Factoring Rates.
Here’s Robert: In today’s market, factors are chasing carriers for business like never before. We know this as many factoring companies now have large numbers of telemarketers calling new carriers minutes after they file for their operating authority. My sales team tells me that close to a dozen factors call a carrier before they go active.
I have no problem with that as its competition at its finest. Pay4Freight also has sales people calling new carriers showing them how to turn their delivered loads into immediate cash.
What sets us apart is that Pay4Freight has always been and will always be a flat rate factoring company.
The reason is we believe you should know the exact cost you’re paying each time you send us a load.
What I do have a problem with is deceptive pricing schemes and failure to disclose material information up front.
Many factors quote a lower rate just to get you to sign up, and then they raise the rate the longer the invoice is outstanding, and then, if not paid by x amount of time you must give back the money you received. Then it becomes your problem to collect the invoice.
Where’s the real motivation by the factor to try and collect the invoices so your factoring fees are lower? Hello…there is no real motivation for them to collect the invoice in a timely manner—especially if it’s close to the next rate increase.
We’ve heard many times of carriers who signed up with other companies where the company failed to say anything about the rate increases that take effect after so many days. They are told a low number and after that it’s “Let’s sign you up!” To be fair, the carrier should have read the factoring agreement carefully before signing.
There’s a lot of motivation by the factor to collect the invoices in a timely manner if the rate is only one flat fee, especially if the invoice becomes past due. Then add on the fact that we’re non-recourse, the motivation becomes even greater. We don’t have you to bail us out if we make a bad credit decision and we don’t make you do the heavy lifting to collect our money.
I believe, in this life, you get what you pay for. Cheap rates many times will cost you more in the end. Either in time or money if your involvement is necessary to collect the invoice. So where then is the real savings of using a factoring company when you have to spend time helping the factoring company get paid? This is why you hired them in the first place—to take care of your receivables. As if you need one more thing to do while running your business.
The answer? Hire a factoring company and pay one flat rate only that actually allows you to do what you best – haul freight. It may cost a little more than the cheap rates that some less than reputable companies try to lure you with, but knowing that you can trust your freight factoring partner will provide you with two things: your money and peace of mind.
Call us anytime if you have questions or for a free analysis and to help show you all the little details in these agreements that could cause you great harm for not fully understanding the legal “un-ease” of today’s factoring contracts.