Freight brokers are basically middle-man between the shipper, buyer or owner of the product and the trucking company that moves the freight. Freight brokers will accept an order for a load to be moved from the customer and arrange for the transportation of the goods by locating a carrier to move the load. Freight broker’s revenues are generated by the freight broker simple paying the carrier less than what they are being paid by their customer, which then becomes the freight brokers "Margin" or profit.

This freight broker business model, for all intents and purposes, sounds simple but in actual fact, it is not. The number one challenge that new freight brokers face, is finding customers.

The Right Customers

In order for a freight broker to start moving freight, finding trucks and ultimately making their margins, the freight broker needs to find customers. Not just any customer will do for a freight broker. They need to be a customer that has good volume, pays the freight broker quickly and is too busy to do the leg work that a freight broker will do for them. A good freight broker will basically become an extension to the customers shipping department and an integral piece to the supply chain. As the customer pays the freight broker and the freight broker pays the carrier, it’s important that the customer has the ability to pay the freight broker in a timely fashion. Carriers normally want to be paid in 30 days from the delivery date of the load and if the freight broker does not have the cash flow to finance this, they are left to wait for their customer to pay them. Nothing will kill a freight brokers business faster than bad credit. A freight broker with bad credit or a history of paying slowly will be a freight broker that will not be in business for long.

There are finance companies that will look at financing the receivables for freight brokerage companies and by doing so, advancing the freight broker funds on their outstanding invoices. This is done for a fee by the factoring companies and the freight brokers should only look at using a service like this, to get their freight brokerage business up and running and not as a long term crutch for their freight brokerage businesses.