Factoring is based on the Gross cost needed to move a load. If a driver receives $5000 for a load, he then needs to deduct overhead costs such as fuel, tolls, maintenance, etc. Once these deductions are made, he may be left with 30% or $1500. If the load is factored at 5% that’s $250 or 17% of the drivers, net profit. Such a large cost simply because of a drivers miss-management of cash flow!
Factoring varies company by company, typically the lowest charge would be 2%, but only for the first 30 days. Currently, the lowest charge I have uncovered is a half a percent for every 10 days that the invoice remains unpaid. Flat rates are also offered but these are usually unfavorable if the invoice is to be paid promptly.
Continue reading “Factoring, where does all the money go? What is the real cost?”