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THE WORST FACTORING COMPANIES HORROR STORIES

1

 Company ABC Trucking signed on with XYZ Factor for a 1 year, recourse agreement. The money that hit their bank account after running a load didn't match the amount of the load's worth. In the contract, the reserve amount is not listed. Therefore, XYZ Factor varies how much they give the carrier as it is up to their discretion. ABC Trucking can only terminate the contract between 120 and 90 days out from the contract renewal, locking them into an agreement that is taking money from them. 


 

WHAT TO LOOK FOR:

  • If there is a reserve, make sure the reserve amount is started in the contract. Otherwise, the amount is up to the factor's discretion and could change every fund.
  • Understand the termination terms of the contract when signing on for a year.

RESERVE CLAUSE (pdf)

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2

 

Company Truckerz signed a contract with Factor4U that is unclear if it is recourse or non-recourse in its terms. They thought they were just signing a 90 day factoring contract, so they could leave easily after that time. However, the contract terms state you have to notify the factor that you want to cancel a minimum of 90 days out. So, Truckerz was really stuck in the contract for a minimum of 180 days (unless they paid the termination fee). 

WHAT TO LOOK FOR:

  • If the contract states if it is a recourse or non-recourse agreement
  • The length of a contract. Check the fine print to make sure if you're signing a 90 day contract, that it is only 90 days, and you can leave after that time period hassle free.
  • The termination fees clause to understand the price of terminating a contract early

TERMINATION CLAUSE (pdf)

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3

 

ADZ Trucking signed a recourse with no reserve, one year, contract with GGG Factors, but it's not as simple as that. Hidden terms stated the rate can be adjusted each month depending how much volume ADZ Trucking brought in the previous month. It was also hidden that GGG Factors has the right change the reserve at any time. ADZ Trucking signed on with no reserve, but GGG Factors can increase the reserve to 5% if they want. There was also no early termination option for ADZ Trucking if they decide they want to leave and if ADZ never factors a load, but signs the contract, they must pay the factor $2,500 in admin costs, but it still doesn't terminate the contract. GGG Factors had only paid ADZ Trucking $7k of the $100k they sent them in the 2 weeks they've been signed on. They only have one login, and their client reps tell them google links to search instead of helping solve the issues hands on.

WHAT TO LOOK FOR:

  • The clause that states if the factor can change the reserve or the rate at their discretion at any time
  • An early termination clause
  • A minimum funding volume requirement

NO RESERVE CLAUSE (pdf)

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4

 

All About Trucks signed a " non-recourse" contract with Summer Factoring that has no term limit. The contract has many misleading clauses including: a "non-recourse factoring fee percent" at 2.5%, a "non-recourse collection fee percent" at 0.5%, and a "reserve percentage" at 4%, making the rates add up quickly. The 4% reserve also makes the contract a recourse agreement, and not the non-recourse one that All About Trucks thought they were signing up for. All About Trucks has 10 days to send in all original paperwork or has to pay Summer Factoring $10 per day it's late after that. If All About Trucks sends the rate sheets in the wrong order, Summer Factoring charges an extra $5 per invoice. If All About Trucks requests a wire and sends in paperwork in more than one email, they are charged an extra $25. All About Trucks can only request their reserve be released twice a month and Summer Factoring can increase the reserve rate at their discretion without permission or approval from All About Trucks.

WHAT TO LOOK FOR:

  • HIDDEN FEES - this contract is full of hidden fees that add up 
  • HIDDEN TERMS - the hidden fees add up if you make a mistake that is stated in the hidden terms
  • The type of agreement - make sure you fully understand if the contract you sign is recourse or non-recourse

Files coming soon.