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How to Become a Freight Broker

Omkar Phatak
As intermediaries, freight brokers bring shippers and motor carriers together to facilitate optimal transport solutions.

Networking is the Key

Networking with transporters and shippers is the core necessity of the freight brokerage business and hence, working with experienced professionals, prior to starting your own business, is vital in developing contacts.
Freight brokers are liaisons who match the need for transportation, with the means for it. They are the people who act as middlemen, to arrange for the transportation of goods, that are produced by companies, with shipping and other transportation agencies.
If you see the history of transportation, there has always been a need for agents, who could arrange for conveyance of goods and raw materials, easily and effectively.
If a company needs a transportation facility for exporting or importing goods domestically or internationally, they find the right transportation companies for them. These may be shipping companies, which have freight carriers, truck companies, which arrange for land transport, or air transport carriers.
There are schools that provide training for becoming a freight broker. This type of brokerage is quite a profitable business with lucrative returns. With the world economy globalizing, new opportunities for trade have opened up and the need for transportation has heightened too. It can be a challenging business that's full of nascent opportunities.
One needs to have a very good knowledge of transportation facilities, that are made available by different shipping companies, as well as other facilities.
You need to develop a network and rapport with companies in need of transportation and provide it for them, reliably. The earnings are through commissions that the broker gets from both sides of a deal.

How to Become One

Step 1: Get Hands-on Professional Training

Find schools that offer professional training. Many transportation intermediaries offer it. However, there is no formal or official educational degree requirement to become a freight broker. You need to develop basic marketing and selling skills and understand all the intricacies of how a transportation business works.
You need to learn negotiating tactics and be able to carry out all the documentation and financial transactions required by the business. The best way to learn is to work under a licensed broker and get hands-on experience.

Step 2: Incorporate Your Business

Before going ahead with the licensing application, you must incorporate your brokerage business. Decide on its legal structure by choosing between a LLC (Limited Liability Company), sole proprietorship, and other options.

Step 3: Get the Brokerage License and Registration

To become a legitimate freight broker, one has to get a license from the Federal Motor Carrier Safety Administration (FMCSA), which is a division of US department of transportation. It is the apex authority in USA, that grants licenses for brokerages.
The FMCSA charges a specific amount as a fee to complete all the formalities. This fee needs to be paid using a credit or debit card. There is a form called OP-1, that you need to fill and submit for the same.

Step 4: Arrange for Surety Bond or Trust Fund

Only obtaining a license from FMCSA is not enough. As collateral, the broker must have a minimum required amount as surety bond or trust fund, which needs to be arranged through an insurance company or a bank.
The details of the collateral must be submitted to the FMCSA using the BMC-85 form. This is a kind of security or collateral, in order to cover the damages, in case a broker fails to meet his obligations.

Step 5: Get a Processing Agent

One last piece of procedure involves selecting a processing agent who operates in your state and covers the legal issues and litigation problems that may arise in your business. Form number BOC-3 needs to be submitted for choosing that agent. With this, you are all set to start your own independent business.

Step 6: Get the Unified Carrier Registration and Complete State Level Legalities

One more formality to be completed is getting the Unified Carrier Registration, which requires a specific amount to be paid as a fee. Some rules regarding businesses vary in every state. Make sure that all the other legal requirements in the state for your business, are duly completed.
Set up your office, with all the necessary equipment like computer, printers, a phone connection, and arrange for all other logistical necessities. Make sure that you have a transport management, rate benchmarking, and load matching software installed and you know how to use it.

Step 7: Start Networking: Contact Shippers and Carriers

Networking is an essential part of the brokerage business. Make a list of companies in need of transportation, from your area. Also, get a list of the freight carrier and land transport agencies in your area. Introduce yourself to these companies and start making deals between them, to create business opportunities.
You carry a huge responsibility on your shoulders as a freight broker since the company will select transport, according to your recommendation. You must ensure that both sides get a cost-effective deal and the relevant paperwork of agreements between the two is carried out. It is essential that you know the rates for different loads in the market.
Most brokers develop their own niches in transportation. Be it the frozen foods business, transportation of hazardous materials, or even waste transportation, specialization in a niche and networking in a specific domain can help build your business rapidly.
With businesses globalizing worldwide, the market for cost-efficient and customized transportation solutions is growing rapidly and freight brokers who can fulfill this demand, stand to make big bucks.