Checking Freight Broker Credit Ratings
While the majority of freight brokerages maintain respectable business practices, it’s important for carriers to properly vet potential brokers before working with them.
Penalties have gotten steeper for freight brokerages that don’t treat carriers fairly, including paying them on time. But this has not completely deterred all brokers from poor behavior. While the potential for payment issues can pose a significant credit risk to carriers of any size, smaller trucker companies need to be especially careful. With such small margins and high operating costs, missing even one payment from a broker can have serious consequences for the long-term success of their business.
Below are a few ways to find out important information about the brokers you plan to work with:
Monitor Credit Through a Third Party
Third-party credit reporting services can help you check the broker’s credit rating and days-to-pay information. For example, finding a system with an app that tracks and reports payment and credit information on thousands of freight brokerages can be a useful tool. This type of service can produce detailed credit reports designed exclusively for carriers. Avoiding freight brokers that pose a high credit risk is smart and these types of services help you make informed decisions.
Search for Historical Information
When you search the broker on the web, you’ll quickly find its MC number and DOT number. This information will enable you to identify the broker’s insurance carrier and to discover how long the brokerage has had an active authority. Another resource for this type of information is the Federal Motor Carrier Safety Administration (FMCSA) website.
Any good business relationship starts with asking the right questions. When vetting a broker and checking for risk, consider these specific questions.
- Does the freight broker have the required $75,000 bond?
- How long have they been in business?
- How are they going to pay you?
- Do they have references they’re willing to share?
Trust Your Instincts
This is perhaps an obvious tip, but it’s worth repeating. When business gets busy, it can be easy to forget that your instincts are your first defense against risk. How is the broker’s customer service? Do they answer the phone or respond promptly to outreach? Do they have a functional and user-friendly website? A broker that prioritizes customer service is much more likely to be a dependable partner.