馃攳
Freight Broker Factoring - How to Use OPM to Grow Your Freight Broker Business - YouTube
Channel: FreightBrokers
[4]
today we're going to talk about freight
broker factoring how to use OPM to grow
[12]
your business now who here guessed what
OPM stands for OPM stands for other
[20]
people's money okay
[26]
let me first explain what freight broker
factoring is freight broker facting is a
[32]
form of financing right that allows a
freight broker to pay their carriers in
[39]
their core business expenses within 24
to 48 hours after moving a load okay so
[48]
it's a form of financing that allows
freight brokers to to pay their carriers
[54]
and their core business expenses within
24 hours 24 to 48 hours after they move
[61]
a load and the way that works is that
the factoring company will actually
[68]
purchase the invoice from you and a
small discount typically somewhere
[74]
between one and a half and three and a
half percent they'll purchase that
[78]
invoice at a small discount and then
they'll advance you ninety to ninety
[83]
five percent of that invoice within 24
to 48 hours they're gonna give you that
[89]
money within 24 to 48 hours and then the
factoring company will actually invoice
[94]
the shipper
wait for that shipper to pay them within
[98]
typically 30 to 60 days and then what
happens is they get paid and the
[105]
transaction basically is complete right
so that's the way it works
[112]
it's OPM stands for other people's money
right and so the cool part about that is
[119]
that in order to start a freight
brokerage it means if you leverage
[123]
factoring it means you don't have to
have a bunch of money laying around
[128]
right like most of us don't have a bunch
of money just laying around stacked up
[132]
waiting to be used to start a freight
brokerage right so you know what it
[136]
allows you to do is it allows you to
start your business without having a lot
[140]
of capital it allows you to grow your
business without having a lot of capital
[146]
right
[150]
so let me explain to you the process of
how factoring works for a freight broker
[156]
so as a freight broker if you have a
factoring company that you work with for
[162]
every one of your shippers when you get
a new ship or you will submit that
[165]
shipper to the factoring company and
they will run credit on the shipper so
[170]
number one it saves you time and money
because they're gonna run the credit
[173]
they're gonna establish a credit line on
the shipper and then you're gonna book a
[178]
load for that shipper then you're going
to the next step is you're going to send
[183]
the invoice after that load delivers
you're going to send the invoice to the
[186]
factoring company and then the factoring
company is going to advance you up to 90
[191]
to 95 percent of that money within 24 to
48 hours it's really that simple now you
[198]
can make it very complicated if you
choose but that's the basic framework of
[203]
how factoring works and what factoring
is alright
[211]
so let's go into some of the benefits of
factoring and there are several the
[216]
number one it allows you to obviously
pay your carrier's very quickly this
[222]
includes quick paying carriers you could
start quick paying your carriers which
[228]
can be very attractive to carriers in
bringing new carriers in recruiting
[232]
carriers to carry your Freight and
partnering with carriers that need that
[236]
type of cash flow so number one is you
can quick pay carriers because you now
[239]
have that money very quickly you don't
have to wait thirty to sixty days to get
[244]
paid by the shipper alright number two
you have the ability to do fuel advances
[249]
to the drivers that's very attractive
right you now have cash where you can do
[253]
fuel advances to drivers many cases
owner operators need fuel advances or
[258]
they will not even be able to cover your
load and haul your load number three
[261]
fact I said this before factoring will
run the credit on your shippers so
[266]
they're gonna run the credit saves you
time and money in running the credit
[272]
managing the credit write that credit
management piece is an important part of
[276]
business I mean number four it allows
you to grow your business quickly using
[280]
OPM right so cash flow is one of the
biggest challenges in growing any
[287]
successful business most people think
that it's about profit it's really not
[292]
about profit you know there's that old
expression cash is king it's really not
[297]
cash is king its cash flow is king and
cash flow is it can be the life or death
[304]
of any successful business whether it's
freight brokerage or not right
[309]
so that financial process of invoicing
shippers and getting paid by care by
[318]
shippers and paying carriers that
financial management piece is a core
[323]
component to number one being a freight
broker because you are responsible as a
[328]
freight broker to pay every carrier that
you do business with but it's a core
[334]
component of the business and if you
have and if you're a start-up and you
[337]
have a factoring company to help you
with that process it can be very very
[341]
powerful right
[346]
so now let's talk a little bit about the
costs of factoring I mentioned to you
[350]
briefly that the cost of factoring
typically range between one and a half
[355]
and three and a half percent now that
that can the cost of factoring can be
[360]
determined by a lot of different
variables but one of the primary
[364]
variables is how long it takes the
shipper to pay the factoring company so
[368]
if they pay them on time then it's a
lower rate if they delay and pay them in
[373]
60 days it could be a slightly higher
rate okay
[376]
and so the cost of factoring just to
give it to you in in easy numbers if you
[382]
were to move a shipment for a shipper
and you were invoicing them $1,000 right
[388]
let's just for easy math say it was
$1,000 invoice one and a half to three
[394]
and a half percent of that means that
the factoring company is that only gonna
[398]
make $15 to $35 so anywhere between
fifteen and thirty five dollars is what
[404]
they'll make for helping you factor that
one invoice okay so that's one and a
[410]
half to three and a half percent now it
could be lower it could be higher but
[413]
I'm giving you a range here of what the
typical cost is and so factoring is
[419]
extreme way more expensive than
traditional financing for example if you
[423]
were to have a credit line with a bank
and so typically factoring is used in a
[428]
start-up situation or in a high-growth
situation and so what will happen is
[435]
you'll leverage factoring is a way to
get off the ground when you don't have
[439]
capital or a credit line and/or if
you're going through a huge growth curve
[443]
because they can help you stay ahead of
all those carrier payments because
[447]
they're willing to wait thirty to sixty
days to get paid by their ship by the
[451]
shippers and so again this is a
temporary tool it's not a permanent
[457]
long-term tool in my opinion okay some
people do use it long term but in my
[462]
opinion it's a temporary tool until
you're able to build up a relationship
[467]
with a bank and a history with a bank
where you can set up your own credit
[473]
line ideally if you're doing a hundred
thousand dollars a month in business
[478]
right which would be a little over a
million dollar a year business right
[483]
which is still a pretty small freight
brokerage you know you would only need
[487]
about a hundred thousand dollar credit
line and so once you're able to build up
[491]
that history with a bank where they see
the deposits coming in and they see the
[496]
carrier's getting paid and they see that
you're doing business the right way
[499]
maybe it takes a year or two to set up
and develop that relationship with your
[506]
bank where they will then extend you a
credit line and a much lower cost than
[511]
factoring so again number one I covered
what is factoring number two I covered
[516]
what is the cost of factoring number
three I covered the benefits of
[520]
factoring right number four I covered
what is OPM and that stands for other
[525]
people's money all right number five I
covered what is the process of factoring
[530]
for freight brokers and so I think that
should fill in the blanks with a lot of
[535]
the questions that you have now again
you can make this as complex or as
[540]
simple as you need in your mind
my suggestion is keep it simple again
[548]
factoring is a form of financing that
allows a freight broker to pay their
[554]
carriers in their core expenses in 24 to
48 hours rather than having to wait
[560]
thirty to sixty days to get paid by that
shipper and so that's the core function
[567]
of factoring and it's very acceptable
acceptable to use factoring when you
[571]
start your freight brokerage right so if
you don't have to if you have cash on
[576]
the side or you have an established
credit line or you have an investor or
[580]
whatever you have you don't you have to
use factoring there's no problem with
[584]
that save the money okay but if you
don't have that which is where most
[588]
people are I want you to understand that
you can still start your freight
[592]
brokerage by using this OPM strategy and
as a freight broker
[597]
it's called factoring now if you're a
freight agent okay this really doesn't
[602]
apply to you so if you're looking to
become a freight agent which is a great
[606]
way to start you do not have to worry
about factoring that is not going to
[610]
impact you that's the freight broker
that you're
[613]
working unders responsibility to do the
financial management component of
[618]
billing carriers paying share you know
billing carriers and getting paid by
[623]
shippers doing all the cash management
ok those you that are curious or
[626]
interested in getting started as a
freight broker or freight agent I have a
[631]
60-day 100 percent money-back guarantee
it's a hundred percent risk-free for my
[636]
freight broker bootcamp comm online
training program I've trained over 7,000
[640]
brokers and the agents 7,000 students
many of them have went on to grow 6 & 7
[644]
& even 8 figure businesses again I can't
guarantee you anything but the training
[650]
is the exact same training that I was
looking for when I got started and most
[653]
of you on this live know more about
freight brokers than I did when I first
[657]
got started so I put all those resources
together I've had that for over a decade
[662]
now again I keep on saying 7,000 because
it's probably gonna break 8,000 very
[666]
soon we add somewhere between a thousand
and fifteen hundred new students per
[671]
year that go through that course and so
ultimately it's a it's a go at your own
[675]
pace work at home type of course you
guys can check that out okay freight
[680]
broker bootcamp comm all right guys
listen I'm gonna wrap it up for today I
[684]
hope you guys enjoyed this appreciate
you being here I hope you guys have an
[688]
awesome day definitely keep the faith
and I will be back next Monday at noon
[695]
have an awesome day and the foxy
Most Recent Videos:
You can go back to the homepage right here: Homepage