Factoring Companies for Freight Brokerage with Credit Checks, Collections

Did you get your non-compete stuff sorted out?

 

Surely there's a way to check a shippers credit without using a factoring company. I wonder what carriers use to check credit on shippers.

 

Honestly, I can't really help you there. We don't use factors for this. Mostly we do a ton of research on our customers, and extend limited credit until they establish a history of payment.

 

Something to look into. What Does a D&B Report Reveal About Your Business?

 

Is there a reason why you aren't just going the independent agent route? The industry standard deal is 60/40, which is a pretty good living if you're doing north of 120k in gross profit... And if you aren't doing more than that starting your own brokerage is a REALLY bad idea.

I know that a bigger brokerage's factoring rate that I know of was 15% of the gross profit. I wouldn't do all the carrier setup, accounting work, software, and deal with being a new MC for 25%. I'd rather spend that time making more gross profit honestly.

I'm basically of the opinion that for operations with <20M a year in sales it's very hard to justify getting your own MC.

 

You become an independent agent on a 60/40 deal. Then you grow to 3-5M in sales and then you get a 70/30 deal. Eventually at ~10-15M you get a 75/25 deal... And then more often than not you stay there because 25% for backoffice and finance is a pretty good deal. If you have a falling out you break off and start your own operation so that you'll never find yourself in that spot ever again.

Or you start up looking to become the biggest freight brokerage in the world. You have funding, you get a big office and stock it with accounting/carrier service people and fresh young freight brokers. This requires you to have literally tens of millions of dollars, but is a pretty good investment if your name is Jeff Silver.

For most of us not-rich-yet working folks the need to actually own a freight brokerage is pretty far down the list of things we actually need to do to make money.

What people do wrong is assuming that just because you're good at the freight broker role means you're good at business. If you're good at being a freight broker you should broker freight and make money. Anything that contributes to your hourly is a good thing and anything that detracts from it is bad. I'll do right at 700 loads this year. Processing 700 loads worth of ap and ar is a pretty sizable job for someone with no experience doing it. Does anyone think my hourly is higher processing invoices for 40% (and to get that 40% I need to float my customers ~600k from 5/1-7/4 and 400k the rest of the time? It's 25% if I factor) than it would be actually creating sales? And I have to pay for all of my own software?

You need a ridiculous amount of sales to justify hiring a good manager for an accounting/carrier services department.

Like anything in life there are lots of different options and reasons for doing certain things. Buying a freight brokerage is a much more appealing angle than building one from scratch. At least for me. I honestly would probably try to buy out the brokerage I work for before I went out on my own... But I'd almost certainly start buying trucks before I spent money on that scale on this industry.

For the guy with 750k in sales he should DEFINITELY stay an agent. He needs to figure out how to double that asap and being attached to a tiny brand new brokerage will make that insanely difficult. Additionally it might con him into thinking he's successful because he grinds out 75k a year doing 50-60 hours of work when he could be making 45k a year to do <20 hours of work... And spending the leftover time looking for new customers.

At the end of the day we should all aspire to spend all of our time doing what we are best at (and best compensated for...) thus maximizing the value of the time we exchange for money every day. I buy and sell shares of truck. When I'm doing that I'm creating the most value for the world I can be. Anything that distracts from that had better be as good as brokering freight or at least not boring lol.

 

If you feel like the brokerage you're an agent for is stopping you from 'feeling like your own man' either you're a stupid person who is constantly being stopped from shooting himself in the foot by his brokerage or you worked with the wrong brokerage. For actually good/valuable freight agents they are easily the dominant partner in the relationship. I can find another brokerage by snapping my fingers. I stay because I think my brokerage is awesome... And we've actually never had a major disagreement. Funny what happens when everyone is a professional and knows what they are doing.

But yeah it's not an accident that the agent gets the 60 side of the 60/40 split as the baseline level around the industry. Good agents are insanely hard to find.