After years of steady growth, the trucking industry continues to expand. With 18-wheelers carrying almost 70% of the cargo criss-crossing North America, freight brokers play a major role in moving freight. As the intermediaries between shippers and motor carriers, freight brokers ensure that goods get where they need to be when they need to be there.
More than 300,000 people work in the freight brokerage and freight forwarding business, with more companies appearing all the time. The vast majority of those in the industry work in small and medium-sized companies and more than half of those companies employ fewer than four people. Although it may seem like trucks run by a few of the largest international asset-based freight brokers dominate the highway, actually the four largest brokerages represent only about 10 percent of the industry’s annual revenue according to a 2017 study. Many successful freight broker companies are small family-owned, family-run businesses that proudly employ members of different generations of extended families.
What kind of people choose to be freight brokers?
Starting your own freight brokerage can be a profitable path for people with an entrepreneurial spirit, a willingness to continually seek out new customers and carriers, and a strong work ethic. While most freight brokers come from trucking and logistics backgrounds, that training is not necessary. The industry’s licensing agencies and the shippers who use freight brokers to find drivers to pick up their freight do not require prior transportation experience.
However, success in this field does require good business sense, careful planning, and cost management. Even after they complete the different steps needed to become a licensed broker, new brokers typically find a steep learning curve. The successful freight broker will typically have the following skills:
- Strong understanding of transportation policies and safety regulations
- Proficiency in learning and using new technology
- Expertise in sales and marketing for signing new shippers
- Strong communication skills across all channels: phone, email, face-to-face
- Advanced math and problem-solving skills
- Ability to negotiate and work well with others
- Ability to deliver outstanding customer service and timely, safe deliveries
How do you become a freight broker?
Many people find that freight broker training courses and books can help them get their business up to speed fast. Investing the time and money in good instruction from a reputable freight broker school or program is worthwhile in the long run. You’ll learn how to negotiate shipping rates, work with shippers, and gain practical knowledge. After building that foundation of knowledge, you’re ready to work on these ten steps to becoming a successful freight broker.
- Choose a name for your company and register your business. Decide if you want your company to be a partnership, a limited liability company, a sole proprietorship, or corporation. Register the new business at your local business license department.
- Develop a business plan that identifies your market goals and your potential customer base.
- Search out reliable, professional motor carriers with the equipment you need for your target customers. They will be the backbone of your business.
- Apply for your U.S. DOT number and Motor Carrier Authority (MC authority).
- Obtain a freight broker bond (BMC-84 bond), which guarantees that you will follow rules and regulations, and contingent cargo insurance and general liability insurance.
- Choose “Agents for Service of Process” to represent you in the states in which you will be doing business. You can complete the Form BOC-3 (designation of agents for service of process form) and submit to the Federal Motor Carrier Safety Administration.
- Set up your office. You will need a computer, a printer, a copier and fax machine, landline phone, and cellular phone. This is the time to explore freight brokerage software to automate the freight matching and other functions.
- Develop a plan for marketing and signing up new customers. Work with someone who will help you develop an informative and professional website and began calling and seeking out new shippers.
- Find loads through your contacts and trucking load boards. Online load boards have helped many new freight brokers get a foothold into the industry. These freight-matching sites help you find shippers and motor carriers in addition to the network you’re building with potential customers.
- Acquire working capital. Unless you have deep reserves of cash at your disposal, you will need funds to get you started. Many freight brokers turn to factoring their freight bills for a quick, no-debt source of capital.
How does invoice factoring help freight brokers?
Factoring companies specializing in transportation factoring speed up your cash flow so you can promptly pay drivers for delivering loads even though your shippers often wait 30 to 60 days to pay you. At top freight broker factoring companies, the application process is easy and fast and you can be accepted as a client regardless of your personal credit history or the short length of time that you’ve been in business. Factoring companies’ decisions are focused on the creditworthiness of your customers and their ability to consistently pay their freight bills.
Whether you lease on drivers or hire independent owner/operators with their own equipment or you begin to build your own fleet, you will invariably need to pay drivers before you get paid by shippers. Many freight brokers run into a lack of working capital because their customers can take up to 30 or 60 days or longer to pay for the loads that have been delivered.
Once you sign on with an invoice factoring company, you submit proof of delivery for each load (bills of lading with proper signatures of receipt). You then receive an advance on your invoices, minus a small factoring fee, sometimes on the same day that you submitted the paperwork. Invoice factoring enables freight brokers to pay drivers, cover fuel advances, keep up with taxes and fees, and much more.
Interstate Capital has been providing tailored financing solutions to freight brokers since 1993. As a trusted financial partner to more than 10,000 transportation clients, Interstate Capital can offer value-added benefits to freight brokers, including fuel discount cards, funding from copies, membership in a completely free load board reaching more than 60,000 motor carriers, and more. Many freight brokers rely on Interstate Capital to avoid incurring debt and enjoy the peace of mind that comes with a steady cash flow.
In addition, the transportation funding experts at Interstate Capital can help you launch your freight broker business, including financing your broker bond, setting up your DOT and MC paperwork, making decisions on insurance and other steps in the process. Contact Interstate Capital for a free consultation and an instant factoring rate quote today.