Truck Driver Freight Broker License

A significant portion of the goods the U.S. and Canada use are shipped by trucks, which means someone needs to be getting the goods from their suppliers, putting them on the right trucks, and making sure they arrive at the correct destination. This is where freight brokers come in, and in this article, you’ll learn about these professionals and why you may want to become one.

What Is a Freight Broker?

A freight broker is a middleman who helps shippers find carriers to deliver their freight and vice versa. They save shippers time, energy, and money by vetting carriers and streamlining communications and logistics for them, and they can even negotiate lower prices by combining several different companies’ shipments. Freight brokers help carriers by finding business for them, connecting them with customers, and coordinating the shipping efforts. This saves the carriers time and may even prevent them from having to hire people to handle this aspect of their business. Brokers being able to combine multiple shipments also help carriers maximize their trucks and drivers. Freight brokers act as a single point of contact as the freight moves from state to state – and even country to country – and handle all of the legal and logistical issues that come with ground shipping. This takes a load off of both the shipper and the carrier, and it makes it easier for them to keep track of the shipment. Freight brokers can work for freight brokerage companies or work independently as owners of their own businesses.

Why You Should Consider Becoming a Licensed Freight Broker

In order to be an independent freight broker, you’ll need to be licensed. There are a few reasons why you might want to become a licensed freight broker.

1. It can be lucrative. The trucking industry is thriving and is rarely without work, so freight brokers are almost always in demand. As a result of this, business isn’t usually hard to find, which means more money for you since you’ll earn commissions for each shipment you manage.

   There also isn’t a significant amount of overhead in the freight brokerage business since you can often operate out of your home.

2. It doesn’t require a lot of experience or education. While you can’t necessarily start a freight brokerage business with zero experience, it’s relatively easy to obtain the knowledge base you need to get started.

   Working as a truck driver, dispatcher, or logistics manager is a great place to start, but so is working as an employee for a freight brokerage. Taking some classes or training sessions on freight brokerage is also a good idea and may even be required for you to get a job as an entry-level freight broker.

3. It’s flexible. Owning your own business in any industry takes a significant amount of work, but it also gives you the option to work remotely and choose your own schedule, especially once you have things up and running.

   This is an attractive aspect of freight brokerage for many people, especially truck drivers who have spent most of their careers away from home and on someone else’s schedule.

Challenges of Being a Licensed Freight Broker

As is true with being your own boss in any industry, working as a licensed freight broker comes with a significant amount of responsibility. Not only do you need to handle the business side of owning a company, but you also need to make sure that you’re giving your customers the best service possible. Letting legal or logistical considerations fall through the cracks will not only hurt your clients and your commission for that order but will also damage your reputation and affect your ability to attract clients in the future. As a result, you have to balance the amount of work you know you can do well with how much you need in order to make ends meet. In addition to this, you don’t get paid vacation or sick leave when you’re a small business owner. If you don’t work, you don’t make money, so make sure you plan and budget accordingly.

How To Become a Licensed Freight Broker

Once you decide to become a licensed freight broker, there are a few steps you’ll need to take to accomplish this. Please note that this isn’t a comprehensive set of instructions, so make sure to do your research and talk to an attorney to make sure you’ve covered all of your bases.

1. Get the experience and education you need. This will look different for everyone depending on your experience. If you’ve been in the trucking industry for years, you might just need to take a few virtual workshops to fully round out your expertise.

   If you’re just entering the trucking industry, you might also consider working for an established freight brokerage for a few years to get some experience. This may mean a delay in starting your own company, but the expanded knowledge base will be worth it.

2. Register your company. Once you’re ready to strike out on your own, you’ll need to make sure your company is legal by registering it. You can register as a sole proprietor, a partnership, or a limited liability corporation (LLC), and while all are acceptable, note that being an LLC greatly reduces your personal financial risk.

   Check with a lawyer or experienced business owner if you’re in doubt about which one you should choose.

3. Obtain the necessary permits and licenses. Depending on your state and the freight you’re going to be working with, there are several licenses and permits you’ll need to obtain before you can start operating. Some of these include a USDOT number, FMCSA motor carrier authority, and a federal freight broker surety bond.

   It’s always a good idea to talk to a lawyer in your state to make sure you’ve completed everything you need to operate legally as a freight broker. Note that most if not all of these licenses have a cost attached to them in addition to the cost of the surety bond, so make sure you’re aware of these expenses before you fully jump in.

4. Purchase insurance. Clients are going to be wary of working with you if you don’t have the right insurance, and some have policies in place that prevent them from working with you altogether if you aren’t insured.

   To reach as many clients as possible and to establish yourself as a professional organization, you’ll need to purchase contingent cargo and general liability insurance. This insurance will protect both you and your clients if something unexpected should happen.

5. Find process agents. For each state you operate in, you’ll need an agent in that state to handle any legal proceedings that may occur there. The FMCSA has a number of these listed, and you can choose to act as your own in the state where you live.

6. Create a business plan. It’s a good idea to have a general business plan in place before you start the process of becoming a freight broker, but once you have everything in place legally, it’s time to officially write it down and fine-tune it.

   In addition to making a general plan for how you’ll operate, you should identify your potential markets, shippers, and carriers, come up with a marketing strategy, and establish your budget and prices. This business plan will serve as a guide for you to go back to and update as you grow your business, and it will be helpful to have as you apply for loans, open lines of credit, or ask for investments.

Freight Broker License FAQ

1. Is it worth becoming a freight broker?

   Yes, it is worth becoming a freight broker. This career can be lucrative and can bring a significant amount of flexibility since you own your own business. Trucks are responsible for getting the majority of the U.S.’s food, clothing, and other products where they need to go, so there is no shortage of business for freight brokers. The key is to make sure you are diligent in setting up your business, so you don’t incur any unnecessary costs or legal trouble. Any business can fail due to mistakes in marketing, permits, and finances, and freight brokerage is no different. You should also make sure you’re willing to put in the time and money required to get your business off the ground. You won’t get to enjoy much of the flexibility and income you might be hoping for as a freight broker at first since you’ll be building a client base and getting everything running smoothly, although it’ll eventually come. If you aren’t sure you can commit to this, becoming an independent freight broker may not be worth it, but if you can, it may be a great path to take.

2. Is being a freight broker stressful?

   Yes, being a freight broker is stressful. This is especially true if you work independently and not as an employee of a freight brokerage. When you own your own business, if something goes wrong, it’s on you, not on your employer. This, combined with the significant amount of work it takes to organize and manage shipments, often results in freight brokerage being a stressful job. However, many people find this stress worth it for the money they earn and the freedom of being their own boss. You can also mitigate much of this stress by setting up solid practices at the beginning to make sure nothing falls through the cracks. Finding trustworthy legal and business advisors can also help you rest easy that you aren’t missing anything or damaging your company, and setting and sticking to policies and procedures that will protect you from mistakes or liabilities will also help.

3. How much do freight brokers make off each load?

   Freight brokers typically make 3-8% of what they charge for each load. Freight brokers make their money by charging shippers more than they pay carriers for each load. After they use some of this money to pay off their expenses, they usually have 3-8% left over as profit. When freight brokers work independently, they get to keep this 3-8% margin, which is why becoming a licensed freight broker is attractive to so many people. Those who work for freight brokerage companies, on the other hand, usually earn a salary and a small portion of the 3-8% as commission. While being an employee usually comes with less liability, it also often comes with lower pay since their employer takes the majority of the money earned from each transaction.