If you’ve been searching the internet attempting to learn how to become a freight broker or freight broker agent, well, this article is for you. First you need to know the difference between a freight broker and a freight broker agent. In a nutshell, a freight broker is the company and the freight broker agent is one contracted to the freight broker company to act as a freight broker for that company. Confused?
The term freight broker has to distinct definitions; the first is the freight broker as a company. To be a freight broker company you will need a license (also known as authority), a $75K property broker surety bond, BOC-3, and UCR. You’ll also want to be incorporated, have business insurance (contingent cargo, liability, errors & omission…). Side note, incorporate before filing for your license.
Once all of this is in place and active, you may now operate as a freight broker company. You have all the responsibility and liability. You’re going to broker freight, bill the shippers, pay the trucks, plus all of the other day-to-day administrative duties associated with being the freight broker company. Additionally, you are paying all the bills (software, load boards, credit check services…).
Let’s pile on some more here, you will need operating capital! Often you will be paying a truck that moved a load before you see a penny from a shipper for that same load. I know that some say you can factor your invoices and get money faster, but that is a no-no for a freight broker.
As a shipper depends on you to pay the truck, they expect you to be financially sound. A little-known fact is that should a broker fail to pay a carrier and the carrier can’t collect from the bond, a carrier does have possible recourse on the shipper.
If you factor your shippers invoice, your shipper will receive official notice from the factoring company. This notice will notify your shipper that you have chosen to factor their invoices. Therefore, any billing can only be between the factoring company and your shipper. This is basically telling the shipper that your brokerage is not financially sound and raises a red flag.
Besides scaring the bejeebers out of your shipper, the only benefit to the broker is receiving enough advance money to pay the truck, maybe. The net for the load brokered comes after the shipper pays the invoice. But, out of this net will be fees and any other charges the factoring company has imposed. You’re giving away the very profit you need to operate. DON’T FACTOR!
To be a freight broker agent, all one needs is to contract to an existing freight broker as an agent. This allows the freight broker agent to broker loads under the freight brokers license. The freight broker agent is an independent business that will earn money, just like the broker, from the nets of the loads moved. This commission is normally 60%. So, if the freight broker agent moved a load that had a $300 net, the agent would earn $180.
The benefits of working as a freight broker agent, especially for one just starting their career as a freight broker, are huge. A freight broker agent doesn’t have to worry about billing shippers, paying carriers, paying for software, or any of the other administrative costs associated with operating a freight broker company. A freight broker agent can focus on building their business and making money.
As the majority of freight broker agents work from home, the overhead added is minimal. A freight broker agent can expect their monthly expenses to be from $0 – $200. There aren’t many business that can be started for this low amount. All you need to work as a freight broker agent is computer (or other internet device), internet, and telephone. As you are reading this article, and assuming you have a telephone, you have the necessary equipment to work as a freight broker agent.
There’s another benefit for starting as a freight broker agent. After you’ve built your business, you can start your freight broker company and take your business with you. Your customers are your customers. The only exception is if you signed a contract stating otherwise, and you should never sign a contract that wouldn’t allow you to work your customers should you leave that brokerage. Brokers that have no-competes or restrict you from working your customers, you want no part of, and these are few.
Not only are you making money working as a freight broker agent, but you’ve also gained the experience needed for operating your freight brokerage and now meet all qualification requirements mandated in MAP-21 for obtaining your freight broker license.
We’ve had clients that had the goal of obtaining their freight broker license after building their business to have a change of heart once built. The main reason for the change of heart has been that they’re making great money without all of the headache. To each their own.
Hope this has helped to clear some things up for you if you’ve wanted to enter this industry. It’s a great business, can provide unlimited income, great growth potential, and more… if done right.
Thanks, and talk soon…