How Much Does It Cost to Become a Freight Broker?

February 28, 2020
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The transportation and logistics industry involves several players, from shippers and carriers to truckers, freight brokers and professionals. As more consumers demand products delivered to their door, and companies work to keep up with this growing trend, the transportation industry's size and scope increase.

Over the last few years, the number of freight brokers operating in the United States has grown as part of this trend. Freight brokers act as connectors between shippers and carriers, and they play a critical role in keeping the transportation industry moving in the right direction.

The costs associated with starting a brokerage business fuel interest among transportation professionals. Although there are expenses involved in getting up and running as a freight broker, as well as costs for maintaining a successful freight broker business, these are relatively low compared to other industries and small business opportunities. For those looking to become freight brokers, it's necessary to recognize and plan for the expenses involved.

Costs of Getting Started as a Freight Broker

The total cost of becoming a freight broker differs for each person or business. However, some expenses, like registration for an operating authority, are standardized across the freight industry. Here are the most common expenses for a new freight broker and how much they require out of pocket.

Training Expenses

When becoming a freight broker, it is not required to get freight broker training, but it can be beneficial, especially if you have never worked as a broker before. The industry is complex with many roles that might seem similar but are actually very different. For example, a freight forwarder is different from a freight broker, and both of those positions are different from a freight agent. When picking a freight broker training program, you can choose to take an online course or to attend in-person sessions. They range from $300 to $1,500 or more. The biggest difference is the number of materials that the training course provides.

Licensing and Registration Costs

Anyone who wants to become a freight broker should start by registering with the Federal Motor Carrier Safety Administration, or FMCSA, for their USDOT number and broker authority, which is the industry equivalent of a freight broker license. 

This government agency is run by the U.S. Department of Transportation, and it helps manage and enforce safety rules and regulations for transportation companies and professionals. Registration with the FMCSA as a freight broker requires completing an online form through its unified registration system (URS) as well as paying a one-time, non-refundable application fee of $300. 

Any broker who plans to own one or more commercial vehicles over 10,000 pounds as part of their brokerage is also subject to a federal program called Unified Carrier Registration (UCR). It charges a fee per vehicle in a broker’s fleet. Fees range from as little as $11 and as much as $10,000.

In addition to the FMCSA registration as a freight broker, individuals new to the business may also be required to obtain a business license. Requirements for business licensing differ from state to state, as do the costs associated with getting the appropriate license to operate as a freight broker. 

A general business license costs $75 to $100 in some states. Other states may charge several hundred dollars to obtain the required license. Check with your state's business licensing authority to determine the cost associated with your freight brokerage business.

Surety Bond Expenses

All brokers who are registered through the FMCSA system must secure a surety bond and file the appropriate form as proof during the licensing process. For example, a broker who deals in property or household goods would fill out BMC-84 along with form BOC-3, which designates a process agent.

 A freight broker surety bond is an agreement between the surety company, the authority requiring the bond, and the freight broker. It is meant to help provide some financial protection against misconduct or failure to abide by freight broker regulations. However, this protection does not extend to the freight broker or the brokerage business.

It is in place to safeguard the licensing authority and the vendors or customers with whom the freight broker works. Should something go wrong, the freight broker bond pays a claim amount to the harmed party. The freight broker covered under the bond then repays the surety company the amount of the claim paid.

The initial cost of a freight broker bond depends on several different factors. All licensed freight brokers must have a bond of at least $75,000 in place, but the expense of securing the bond is only a fraction of this amount. Freight broker bonds cost Between 1% and 12% of the total bond amount in most cases. That's an up-front cost of $750 to $9,000. 

The surety company offering a freight broker bond determines the percentage paid based on the broker's credit history and claims history with other bonds. Freight brokers should be prepared to pay this amount when starting a new brokerage.

As an alternative, freight brokers can provide a trust fund agreement along with their BOC-3. With this method, the broker puts the full $75,000 in a trust that only the FMCSA has access to. If a dispute occurs, the FMCSA can use that money to settle the claim.

Costs for Business Equipment and Office

Fortunately for freight brokers, little is needed in terms of setting up an office or obtaining business equipment. Most new freight brokers need a desktop or laptop computer, a smartphone, and space to work. 

The cost of a business computer can range from $500 to $2,000, depending on how many features it has. Many freight brokers use their current mobile phones as part of their business, but a new one can cost several hundred dollars.

In terms of office space, many new freight brokers opt to work from home to save money. Others may use virtual office space or sublet an office rather than securing dedicated commercial space. 

All in, startup costs may range from $1,000 to $3,000 up-front for the successful freight broker. 
 

 

Business Insurance Expenses

Regardless of the industry, many business professionals confuse a surety bond with insurance. A surety bond protects the customers of the freight broker, while insurance protects the business or the freight broker individually. 

Business insurance coverage may include general liability coverage, contingent cargo insurance, property insurance, workers' compensation insurance for those who have employees, or home-based insurance for those who work out of their homes.

In most cases, business insurance is not a requirement by either state or federal authorities. However, it is a good practice to obtain insurance based on the operations of your freight brokerage business. The basics, including general liability insurance, may cost between $400 and $2,000 a year.

Software Costs

Although technology is not necessary to become a freight broker, many industry professionals lean on software solutions to help manage everyday tasks. Freight brokering software may include accounting software, a customer relationship manager (CRM), freight management software, or a transportation management system (TMS). This software can do everything from tracking customers, types of freight, and trucking companies to generating invoices.

Each of these software solutions provides a way to manage a freight brokerage with greater efficiency. Depending on the type of software purchased, the initial cost can range from $1,000 to $5,000.

Marketing Expenses

Another cost of operating as a freight broker is marketing the services offered. Some freight brokers grow their businesses by word of mouth and referrals. However, this free marketing strategy is the best fit for those who have a network of transportation professionals or businesses already established.

For freight brokers who don’t already know a good freight broker agent or have an in with a trucking company, paying for marketing may be a necessity. Joining a load board to generate leads, marketing on social media or through a professional website, building mailing list subscribers, or attending networking events may all come at a cost to the business. These costs vary greatly, depending on the amount of marketing and the medium selected. The savvy broker can save money with a business plan that includes a targeted marketing strategy.

Other Costs of Operating as a Freight Broker

Other expenses as a freight broker may include outsourcing certain business tasks. Paying for a bookkeeper to manage business revenue and expenses is one common cost for freight brokers. 

This can range from a few hundred dollars to a few thousand per year. Also, items like business cards, a dedicated business e-mail address, and a reliable internet connection all come at a small cost that should be included in the start-up expenses as a freight broker.

As you can see, the total up-front cost of becoming a freight broker can range from $4,000 to $5,000 on the low end up to $10,000 or more on the high end. Fortunately, not all of these expenses are ongoing. However, there are a handful of costs as a freight broker you'll want to plan for each year. 

These include your freight broker bond renewal, insurance renewals, ongoing software expenses, and business costs such as marketing or office equipment. A competitive freight broker salary should make these expenses worthwhile.

How to Manage Freight Broker Costs

Although the expense of becoming a freight broker is relatively low compared to other start-up businesses, the initial costs can be a bit intimidating. Consider what you need to pay for upfront so a plan can be created to cover these expenses.

If taking money from savings isn't an option to pay for beginning a freight brokerage career, other options exist. A business or personal loan or a line of credit can be a simple way to finance the initial costs. It is important to note that these financial tools also come at a cost, in the form of interest charged on the amount borrowed. Interest expenses should also be factored into the mix if you plan to use a loan or line of credit.

After adding up all the costs of becoming a freight broker, it is necessary to determine if initial expenses can be reduced. Instead of purchasing a brand-new laptop for the business, consider a refurbished computer that may cost less. If possible, use a home office instead of a dedicated commercial space to do business in the beginning.

Finally, utilize free marketing and business management tools as much as possible when you are able. These small but important steps can lead to a profitable freight brokerage business early in the process.

How to Lower Your Freight Broker Bond Cost

There are several ways that you can lower the cost of your freight broker bond. Here are a few tips:

  • Improve your credit score. The better score you have, the less your bond will cost.
  • List all your assets. This can help to lower your premium.
  • Thoroughly research the surety bond agency before making your final decision.
  • Always pay your dues on time.

Are Freight Brokers in High Demand?

According to the U.S. Bureau of Labor and Statistics, the demand for freight brokers is expected to grow by 9% every year through at least 2024. This makes a freight brokerage a great career choice right now.

Is Becoming a Freight Broker Worth It?

Becoming a freight broker is worth it, but you must be diligent when setting up your business. It will help you avoid legal trouble or unnecessary costs that could arise if you make mistakes when setting up your business. As long as you are confident and motivated, you can make a decent living as a freight broker, and there's no limit to how much you can earn.


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26 Comments

John brown
July 8, 2021

In reply to by admin

Thanks for the info

Eric Weisbrot
July 29, 2021

In reply to by admin

Thanks Leon!

Leon Nicks
July 29, 2021

In reply to by admin

Eric your information on start up brokering is spot on. Thank you for the helpful insight.

Eric Weisbrot
July 9, 2021

In reply to by admin

I'm happy you found it useful John!

Jennifer
August 7, 2021

In reply to by admin

Thank you! This was extremely helpful and made me feel like I can do it. I’m a female and I owned my own small trucking company where I hauled asphalt. I’m a physical therapist and would like to institute a second form of income as I get older. Working smarter - not harder as I grow older is key!

Eric Weisbrot
August 9, 2021

In reply to by admin

Hey Jennifer,

I'm glad to heat that! Let us know if you have any other questions along the way.

Eric Weisbrot
October 18, 2021

In reply to by admin

Hey Shawn,

That's because those items don't cost anything, so we omitted those items.

Nicholas R Pecot
October 13, 2021

In reply to by admin

Hey Eric, question! Once you've started your Brokerage Business, what do you recommend for landing your "white whale", or that so called relationship that is going to make you? I feel like a lot of cold-calling will just get you hung up on. Are there forums that shippers post on, indicating that they might want a new company to handle the logistics when it comes to their freight? Thanks in advance!

Samuel Bozeman
November 14, 2021

In reply to by admin

What about cargo insurance? I was told I need that in Ga. I'm just considering this so I know very little about it.
Thank you

Shawn Bell
October 15, 2021

In reply to by admin

Hey Eric
You didnt put gettng your Dot and MC number. Is this not required?

Eric Weisbrot
November 15, 2021

In reply to by admin

Samuel,

I don't believe you need cargo insurance as a freight broker (even in Georgia). However, I think it's sometimes recommended to protect your brokerage.

Ella
December 8, 2021

In reply to by admin

Eric,
This is wealth of information shared. I am appreciative.
Thank you.
Ella

Eric Weisbrot
December 8, 2021

In reply to by admin

Ella,

I'm happy you found the info helpful!

D.R.
January 5, 2022

In reply to by admin

Hello. How would you secure retirement?

Chris
December 21, 2021

In reply to by admin

This article was very helpful. I do have a question though. I am considering on using a Factoring company to help with funding the shipments, until my clients start paying. Do you have anything to say about taking this step?

Johnny Hoang
February 4, 2022

In reply to by admin

Hi Eric

I would like to become my own freight broker for myself export and import from over sea. Is that all i need business license and broker freight license? How much do i need in hand to start one?

Tonya
January 26, 2022

In reply to by admin

Hi Eric,
Do you think I should work for a brokering company first before jumping out of the boat into the sea or take a class?

TH

Eric Weisbrot
January 26, 2022

In reply to by admin

Hey Tonya,

I believe real world experience and classes both have their place, so I'd consider both.

Shikha Jain
January 27, 2022

In reply to by admin

Hello Team! I

We are based out of Ahmedabad India and looking to set up a freight brokerage in USA.

It would be lovely if you can assist us with the list of documents or process in context to Freight Brokerage.
How can we start our company???

Kind Regards.

Orlando Green
March 15, 2022

In reply to by admin

Wow, Eric I'm just starting retirement from tour coaches. I have a Class A license and minimal 18wheeler experience. At this point I'd like to run tractor trailers and get hands on experience. But, the thought of becoming a freight broker would be my goal. U R very helpful. Thxs O. Green

Eric Weisbrot
March 16, 2022

In reply to by admin

I’m happy you found this helpful Orlando!

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