Finding the right freight broker for your business is essential to the success and growth of your company. It is important to work with a brokerage firm you can trust and communicate openly with. Not all freight brokers are the same; vet each brokerage firm you are considering thoroughly. There are a few factors that you should consider when selecting a broker for your shipments. One big indicator of a brokerage firm’s reliability is a freight broker credit check.
What is a Freight Broker?
Freight brokers act as middlemen between shippers and carriers. The freight broker facilitates communications between the shipper and the carrier, they do not at any point take possession of the freight. Essentially, freight brokers ensure a safe and timely freight handoff between carriers and shippers. A good freight broker selects reliable carrier partners and has expertise in managing the logistics of each shipment they are responsible for.
Why are Freight Brokers Beneficial?
Shippers rely on their freight brokerages' network of carriers to transport their shipments. Shippers save a lot of time by using a reputable broker that coordinates with each carrier directly. All shipments routed through a freight brokerage are overseen by that brokerage from start to finish.
What is a Freight Broker Credit Check?
A broker credit check is very similar to credit checks for individuals. A credit check gives an overview of financial history. For a brokerage firm, this credit check can give insight into how reliable they are in paying their clients on time. If their credit check shows a history of not paying clients on time or not paying them in full, they are considered to be a high-risk broker to work with.
How Do Brokers Build Their Credit?
Brokerage credit is dynamic; it can increase or decrease over time. The key to building better credit is to be consistent. Taking the right steps consistently over time keeps your credit score up and the risk of doing business with you low.
Freight Brokers Maintain Good Credit By:
Using Electronic Invoicing & Payments
Electronic bookkeeping allows for quicker payments.
Developing Strong Working Relationships With Carriers
Staying Organized & Paying On Time
Resolving Shipping Discrepancies Quickly
Why is it Important to Check Freight Brokers Credit Scores?
Freight brokers are trusted and strategic business partners for carriers. Choosing a credit-worthy broker is essential to the success of your business. A great broker can help elevate and grow your business while the wrong broker can have a negative impact on your business and your reputation.
Pre-screening a freight broker shows how risky they may be to work with. As a carrier, it is important to find a freight broker that has a history of paying in full and on time.
What is a Good Credit Score for a Freight Broker?
Credit scores for freight brokerage firms are also similar to an individual's credit score; it has a scale to it. Brokerage firms can be considered high-risk, medium-risk, and low-risk. The higher their credit score number, the lower risk they are to work with.
High-Risk Freight Brokers
A freight broker with a credit score of 0 to 69 is considered high-risk to work with. There are a few circumstances that would cause a broker to have a low credit score such as: not paying customers on time, not paying customers at all or they are a new company. New companies may not have had enough time to build up their credit scores. For newer companies, using customer reviews can help determine if they would be risky to work with.
Medium Risk Freight Brokers
A freight broker with a credit score of 70 to 86 is considered a medium risk to work with. A medium-risk brokerage firm may have a few circumstances of not paying on time or at all. They may also have undergone a management or policy change recently and are working to build their credit back up. Checking customer reviews and researching company history can give more insight.
Low-Risk Freight Brokers
A freight broker with a credit score of 87 to 100 is considered low-risk to work with. These brokerage firms have a history of paying on time and paying in full.
How Do You Check a Broker's Credit Score?
Carriers can use a third party to run a credit check on their desired freight brokerage firm. Engaged Financial offers a credit analysis to give you a piece of mind that your company will get paid on time for their shipments.
Choosing a low-risk freight broker with a good credit score may be more expensive than working with a low-credit score brokerage firm. How much risk are you willing to take with your shipments and your company? Ultimately, paying a small percentage more for a reputable and reliable freight broker will save you time and money in the long run. There are many low-risk, high-credit score freight brokers that are reasonably priced.
Engaged Financial is here to help you choose the right firm; our diverse freight solutions can help you grow your business. Request a free quote today at Engaged Financial where the experts help you and your company be the best it can be.