There are certainly many business opportunities to facilitate moving freight from one location to another, and many different types of companies offering their services. So what is the role of a freight broker?
For those of us that sometimes get confused with all the different terminology, freight brokers bring together a shipper, who has products or goods to transport, with a carrier, who provides the transportation. They are effectively transportation intermediaries.
Entrepreneur offers a concise explanation as to the role of a freight broker, and also offers advice for those interested in starting up a freight brokerage business.
Helping carriers or trucking companies fill trucks, and shippers find reliable carriers is certainly a valuable service. However, there are often certain roadblocks when it comes to finding the right type of financing for companies fulfilling this role. The main requirement for a traditional loan for the bank would be collateral that can be offset against the loan. For many start up companies, this simply is not an option. Since a broker is in the business of bringing companies together and earning a commission, there is often little collateral to speak of. The commission earned is obviously a great source of income, but there is usually a gap between invoice and payment of anywhere between 30 – 90 days. Should the shipper default on payment; there may be little spare working capital, after operational costs are met, to chase payment or initiate legal proceedings.
This is where invoice factoring can save the day as well as the dollars! The main collateral for a freight broker who cannot qualify for traditional financing would be accounts receivables. Enter a reputable factoring company to solve the financing riddle.
It helps to work with an accounts receivable financing company who has specialist knowledge of your specific industry, and the inherent issues associated with working with shippers and carriers. Once the fast and simple qualification and approval process is met, the benefits are tangible:
- No more waiting 30-90 days for payment on outstanding invoices
- Dedicated collections department, so you don’t have to worry about collecting from your customers
- Credit checks run on your customers to ensure they are reliable and more likely to pay their invoices
- A dedicated team of professionals working with you so you can spend your time running your business
As a freight broker, it is important to keep up with trucking trends. A great source of information is the American Trucking Association or ATA. With overall freight revenue predicted to be on the rise over the next 10 years, there are many opportunities in the industry.