In today’s world of information overload, it’s easy to confuse truth and fiction. When it comes to the freight broker profession, the myths you can hear can be quite wild — and far from reality.
Before you set foot on the path of running a brokering business, it’s imperative to get a clear picture of what it truly entails to be a freight broker. This is the only way to plan and operate your new endeavor in a way that leads to success.
Freight brokers hold an essential position in the U.S. transportation industry nowadays. They are the indispensable middlemen that help cargos get shipped in more optimized and profitable ways. As such, they are the connecting point between shippers and carriers, and their importance has grown exponentially in recent years.
Just below are the top seven myths about being a freight broker.
Myth #1: Freight brokers and freight forwarders do the same thing
Fact: No, these are two separate professional positions in the transportation field. The task of brokers is to be the missing link between clients who want to get their cargo moved and carriers that provide transportation services. On the other hand, forwarders are fully in charge of the goods that have been entrusted to them. They act on behalf of the cargo owners for the entire shipping process.
Myth #2: You can learn how to be a successful freight broker online
Fact: It’s possible to start a freight brokerage without actual training, but this choice may cost the success of your business. A much wiser step is to attend a brokering school and learn from the top training materials available on the market. By doing this, you can gain hands-on experience and insights from seasoned professionals in the industry. While you will need to invest time and money in the process, the chances are that you will be much better prepared for your new vocation than if you opt-in only for online information experience.
Myth #3: The only way to get a freight broker license is if you have $75k in the bank
Fact: No, there is an easier alternative to meet the $75,000 financial responsibility criterion of the Federal Motor Carrier Safety Administration. Rather than blocking this large sum in the bank, you can obtain a freight broker surety bond, which is also known as a BMC-84. It is a fully accepted way to satisfy the requirement, instead of providing it in the form of a BMC-85 trust agreement. In order to get the bond, you have to pay a premium that represents a small fraction of the required amount. The exact percentage is based on your personal and business finances. If they are strong, the premium can be as low as 1% to 5% of the required $75,000.
Myth #4: You can’t get a freight broker bond with bad credit
Fact: You may be able to get bonded despite your financial problems. However, you will have to use a bad credit surety bond program tailored specifically for applicants with financial issues. The rates are typically between 5% and 10%. The bonding decision will be based on a careful assessment of your finances and the risk that you pose to the surety provider.
Myth #5: You can operate as a freight broker without a license
Fact: No, you cannot. You have to obtain an operating authority from the FMCSA before you can engage in freight brokering activities. The exact license name is Property Broker Registration and it is required of all brokers. It is unlawful to work without the necessary paperwork and doing so can get you into serious legal problems.
Myth #6: Freight brokers take possession of their clients’ goods
Fact: No, most brokers never see the actual cargo whose shipping they coordinate. Your job is to organize the transportation of the goods, but this does not entail you having to hold it at any point during the process. In some cases, asset-based brokers may take possession of the cargo for a short while, but it is not a typical practice.
Myth #7: Non-asset-based freight brokers do not have access to trucks
Fact: This is not accurate, as brokers without assets may have a much bigger carrier network than brokers with assets. Even if you do not have trucks of your own, your working connections with other transportation professionals is what can make you excel in your field.
What are the top myths about being a freight broker that you’ve stumbled upon? Have they been debunked? Please feel free to share them in the comment section below.
Editor’s Note: Vic Lance is the founder and president of Lance Surety Bond Associates, which provides services to help freight brokers become licensed and bonded. This article was authored under the guidance and editorial standards of HDT’s editors to provide useful information to our readers.
Originally posted on Trucking Info