Being a licensed freight broker is a fulfilling career that not many people know about. If you’ve come here, you’re on the right track.
However, there are a lot of things you need to know before you take the plunge, and we’re here to help.
We’re going to go over all the steps and requirements for how to become a licensed freight broker to help you get started.
You’ll learn about the requirements as they become relevant in our step-by-step guide, but there are some things you should be aware of upfront.
First, it’s going to cost at least $20,000 to get started. It isn’t something that you can do on a tight budget with no funding available. That said, it is cheaper than starting many other businesses.
On top of the funding, you’re also going to spend about 6 months getting qualified if you take a training course, and at least 30-60 days for the licensing part of it, and your business isn’t likely to become profitable for about a year. It takes time to build up the connections needed to thrive.
Speaking of connections, this is not a business for someone who doesn’t enjoy socializing. The entire concept is that you connect shippers with carriers and handle all communication between them. So, you’ll need to be pretty good at communicating with people.
Finally, experience is not required. However, it does help a lot. If you can get a job within the industry working in logistics or dispatch, you’ll have a far better chance at succeeding as a freight broker. You can even do it part-time for a while just to learn the ropes.
We can break this process into 8 steps. Some of them take months, while others are extremely simple.
A training course isn’t a legal requirement most of the time, but it provides a ton of value that will help you throughout your entire career. It’s worth it. Especially if you don’t have industry experience.
While you will spend anywhere from one to six months completing the training course, you’ll learn all about the logistics of the business, how things are done, and how to create the various types of paperwork you’ll need throughout your career.
These training courses are flexible, too. You can take them online or attend a physical location to learn directly from an instructor.
It’s not always a requirement, but it will set you apart from other would-be brokers who jump right into business.
You do not want to be a broker under your own name. You want to create a business and register it as an LLC or other business structure. This takes a little time, and you likely need a business license in your state, but it means you’re not responsible for anything that happens to the business.
Let’s say that you take on a lot of debt or get sued, and the business has to close. If you operate it under your name, that debt or lawsuit can follow you forever. It can take your home, have your wages garnished if you start a new job, etc. If you have an LLC or similar formal business structure, that’s the end of it.
Now, you’re going to get in touch with the FMCSA for the first time. You want to apply as a Broker Authority. This will be your MC number.
Your MC number is basically your license to do the job. It’s filed directly with the Federal Motor Carrier Safety Administration to grant you the right to set up shipments. More specifically, it lets you do your job as a broker and set up shipments without owning any trucks.
You’ll be managing everything for shippers and carriers, and there’s a lot of responsibility in that that needs to be tracked.
This is also another expense. Luckily, it’s a smaller one. Expect to pay around $300 to get your MC number.
Once you have an MC number, you need a BMC-84. That’s your freight broker bond.
A freight broker bond is essentially a type of insurance for the people you’ll be handling shipments for. Carriers and shippers have a lot of money on the line, and your surety bond ensures that there’s a fund available if there’s ever an issue with non-payment or something similar.
Luckily, while you need a surety bond of at least $75,000, you do not pay $75,000. You’ll pay a premium just like you do with your car insurance or any other similar thing. Usually, that’s around $1,000 to $4,000 each year.
Your BOC-3 is your processing agent. You file this with the FMCSA, and it sets a legal representative for you in each state.
You will be working across state lines, and unfortunately, that creates legal issues for bad apples. The BOC-3 ensures that someone filing a legal proceeding against you can do so regardless of the state you’re in, and you can’t flee legal matters.
This can be one of the most complex parts of setting up your career. You need the software required to efficiently manage shipments. You’ll at least need transportation management software and a CRM to handle everything, and there are a lot of options available. These are typically licensed and have recurring costs.
Here’s where the real work comes in. You can’t be a broker if you don’t know any carriers and can’t secure shipper clients. Your whole job is to connect the two. So, start networking and getting yourself out there.
Once you have some carriers you’re willing to work with and can trust, it’s time to start connecting shippers with them. This is what you went to training for, got the license for, and invested your time and money in. Now, it’s just time to do it.
If you’re interested in becoming a licensed freight broker, why not start your networking endeavor by talking to real pros who would love to help?
Reach out to Diversified Transportation Services and see how we can help.
Whether you're a company looking to improve one facet of your supply chain, your entire supply chain, or simply looking for a transportation and logistics consultation, we can help.
19829 Hamilton Avenue
Torrance, CA 90502