Factoring is very common across sectors with long payment durations. It’s amazing for manufacturing businesses for example who may not get paid for 30, 60 or 90 days after shipping product. The great thing (and where it is nothing like payday loans when done correctly) is that the responsibility and risk of collecting payment falls to the factoring company and not you. We happily factored for years just to offload payment chasing for a tricky customer, well worth the 2%.
There was an interesting sentence in that section. I thought that factors shouldered the non-payment risk but article seems to imply that non-payment would come back and bite the truckers
Yeah, I had to heavily edit the piece to ensure that it wasn't a mini-novella.
So, for more context on factoring, there are two types - recourse and non-recourse. Recourse factoring means that the factoring company can come back and ask the driver for their money back. Generally, the rates for recourse factoring are lower (by 20-50 basis points only because the default rate in drivers is quite high).
Non-recourse factoring is something that the industry is transitioning to. Most of the startups offering factoring today are doing non-recourse. The problem with that approach is that fraud rates rise exponentially. Not too sure how the landscape will look even 6 months from now as easy capital goes away.