Bond & Carrier Payment.

Discussion in 'Freight Broker Forum' started by Disgruntledriver, Nov 25, 2014.

  1. Disgruntledriver

    Disgruntledriver Light Load Member

    I'm trying to calculate exactly what it will take to become my own freight broker. Instead of explaining my whole situation, if you're curious read my few other threads in this forum. I'm going to ask two basic questions, which seem to be the biggest hurdles to cross in becoming your own independent broker.

    #1 is paying the carriers.

    This is where everything seems to get hazy and no matter how much research I do, I seem to read mixed opinions on the solution. Just starting out, how do you initially pay your carriers before the shippers pay you? I've read a few times online that a lot of carriers are understanding enough to realize they don't get paid until you do, but having been a truck driver myself and having known many owner operators I find this almost impossible to believe. I want to get out there and be successful and I know a lot of this business is cut throat, but I also don't want to completely screw over others. There must be some degree of fairness, right?

    I've also read online and been told that there are 3rd party banks and or escrow services that will pay the carriers and wait for you to pay them back once the shippers pay you. The thing is, I cant' seem to find any information on this.

    I've also heard that another option is obtaining a business line of credit, I read you will need about $250,000 but that seems a bit high, since (correct me if I'm wrong) you will only be needing it until you start receiving payments a month or so down the road.

    My credit is pretty good, nothing bad on it, on time payments, no late payments, score in the mid 700's but I've never gotten a mortgage before. Can this be worked with?

    I'm just trying to figure out what course of action to take.

    #2 is the bond.

    From what I see there are companies like pacific financial that can get you the $75,000 bond without having to foot thousands of dollars. I've heard it can be gotten with decent credit for around $500 up front investment. Is this correct or misinformation?

    I'll do what I have to do to scrounge up enough $$$ to get this off the ground, if it is a possible thing to do that is. That's why I'm doing this research before I begin or commit to something I might not can do.
     
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  3. Boogy

    Boogy Bobtail Member

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    Just an observation.... Wouldn't it be best to learn how to broker first???? Pacific Financial is the bond place where one goes when no other will write. 250k line will need to have collateral securing it. You're putting the cart in front of the horse......
     
  4. Disgruntledriver

    Disgruntledriver Light Load Member

    Well, the place I recently got signed onto hasn't really "Taught" me anything and they don't know anymore than I know. They've told me simply to get on the phones and book loads, but haven't told me how nor do they seem to know. I've been trying to research the crap out of everything I can but I definitely want to know all the details. Perhaps one of these at-home courses would be good? Or even going to one of the legitimate schools for it? I believe the courses are usually just about a week long. Through whichever means, yes, I want to make sure I know more than I do now, but I'm not completely in the dark at this point and have learned a lot from many people over the past month or so (not just here). I've also just recently learned about freight "factoring" and that answers in the greatest part my first question.
     
  5. rollin coal

    rollin coal Road Train Member

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    You can always factor but say "buh bye" to that "100% take". Another hand in the pie. Do you think maybe there could be value in working on a percentage? Factoring is like a crack habit can be very hard to kick. Being a brand spanking new broker if you get anyone to haul your loads that doesn't demand on payment either partially or in full upon delivery consider yourself lucky. Most carriers will not touch you otherwise. So you have to pay them.immediately then wait 45 days, give or take, to get paid yourself. Does that sound like fun? $250,000 can burn up quickly, it's really nothing, what then? Everyone says all you need is a fax line and a laptop then you're in business on the way to easy riches but no-one has ever proven this to be the case - that it's THAT easy.
     
    G/MAN and double yellow Thank this.
  6. Disgruntledriver

    Disgruntledriver Light Load Member

    Of course it's not that easy. And if while getting started another hand must be in the pie then so be it, at least it is MY business and I'm building up my credit within my business. I agree, I can see why carriers want payment very quick after they deliver the load, which is what factoring is for.
     
  7. Skate-Board

    Skate-Board Road Train Member

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    Pacific Financial is the worst. They are the last resort when brokers can't get a bond. Your going to need a line of credit. Also, when you first start up you will have no credit rating as a broker. Most carriers won't even talk to you. On the Internet Truckstop it takes 1 year before you are given a credit rating. The only way to get carriers to take your loads is to advertise you pay on delivery via Comcheck.

    Then your going to need shippers. Most won't even talk to you. If by chance you do get a shipper you won't get any trucks because your new and the shipper will dump you.

    Very hard to start up a new brokerage. Most that do come from a larger company and take their clients with them and hope they survive the first year.
     
  8. Boogy

    Boogy Bobtail Member

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    Glad you got it all figured out and are on your way to easy street!!!!
     
  9. Marlin46

    Marlin46 Medium Load Member

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    Umm, I never ask for payment very quickly but typically agree to 30 day terms standard in most contracts...whether your client paid you in that same time frame has no bearing on me. When you go into business for yourself, you also take on the risk. Small brokerages go bankrupt often enough...what happens when your client goes bankrupt or the shipper decides to switch to 60 day terms? Are you going to factor the invoice for 5% of the total that may or may not be non-recourse? Capitalism keeps the margins thin enough in this business. The freight broker class IMO would be a waste of time. Try and make a 10-15% margin would be the route I would go, if I were to go this route. I'm not.
     
  10. G/MAN

    G/MAN Road Train Member

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    Most bonding companies charge about 10% of the face amount. They also require assets equal or of more value than the face amount of the bond. You might set up a line of credit and use that to cover the bond. There is an annual cost for the line of credit, whether used or not. You will need cash or other assets to secure the line of credit, especially for a start up.

    You could finance your receivables with a line of credit or by using a factor. It will be difficult to find those willing to take a chance on you for the first year or two. We don't do business with any new brokers unless we receive payment in advance or COD with a guaranteed check, such as Comcheck,T-Check, etc., The check is paid before the truck is unloaded. Factoring would not use up your credit and could help cash flow until you get on your feet.

    My concern with your situation is that you don't know anything about the brokerage business. If I were you, I would find a broker or agent that is tied to a major carrier, and see if you can work with them while you learn the business. That way, they assume all the risks and costs and you can learn the business while earning some commissions. Starting a business is always a risk. Starting a business with NO experience is not a good idea. Once you learn the business, you can go out on your own.
     
  11. Disgruntledriver

    Disgruntledriver Light Load Member

    You're right, I've not been a broker before. I've done a ton of research, seen brokers in action, etc but have not been a broker myself. I've been in this transportation industry, I know what's going on, I get the jest of what is done as a broker but I've not yet been one. Would one of the better brokering schools be a stupid idea? Or could that perhaps teach me the basic skills I need to get going? I've heard the biggest part of this job is persistence and dedication. I've also heard that a lot of people overthink it and that it's not rocket science, not to say it's easy though. That's why I'm asking here and appreciate all the feedback so far.
     
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