Start-up

Can anyone give their opinion on MINIMUM capitol required to float a small (under $20,000 gross sales per month) start-up brokerage?

As a fellow South Carolinian, I'll give you my two cents. I have over 10 years experience in the brokerage industry and in my own opinion, I wouldn't go into it without having a credit line close to $100,000 set up.
Your minimum start up expenses will be: Authority $500.00 or less, phone system, computer with internet access, $10,000 surety bond, local business license, and I would also recommend getting Contingent Cargo insurance.
Your biggest concern as you grow will be cash flow, seeeing as how you will pay the carrier faster than you will be getting paid by the customer.
On the other hand, you could become an agent for an established brokerage, which will allow you to be paid a commission on the loads you move, eliminating the cash flow worries and some of the other worries as well.
To help you figure your cash flow needs-you will pay the carrier in 1-20 days and you won't receive payment from the customer for 40-60 days.

K in Greenville, South Carolina said: As a fellow South Carolinian, I'll give you my two cents. I have over 10 years experience in the brokerage industry and in my own opinion, I wouldn't go into it without having a credit line close to $100,000 set up.
Your minimum start up expenses will be: Authority $500.00 or less, phone system, computer with internet access, $10,000 surety bond, local business license, and I would also recommend getting Contingent Cargo insurance.
Your biggest concern as you grow will be cash flow, seeeing as how you will pay the carrier faster than you will be getting paid by the customer.
On the other hand, you could become an agent for an established brokerage, which will allow you to be paid a commission on the loads you move, eliminating the cash flow worries and some of the other worries as well.
To help you figure your cash flow needs-you will pay the carrier in 1-20 days and you won't receive payment from the customer for 40-60 days.

40-60 days??? What are you a bank? In this business you need to e aggressive in collections. This will determine if you make it or not. A lot of my customers pay within 14-21 days because they know that they can't use my service if they are past 30 days. I charge interest after 30 days. Remember, it is important that you keep on top of collections or you will go under!

I do agree, you need a large amount of cashflow. A bank will be hard pressed to give a line of credit without collateral, but it is the better way to go than a factoring company. Factoring companies make a lot more money and don't take the risk for the return for the amount they are making!

Mr Broker in Chicago, Illinois said: 40-60 days??? What are you a bank? In this business you need to e aggressive in collections. This will determine if you make it or not. A lot of my customers pay within 14-21 days because they know that they can't use my service if they are past 30 days. I charge interest after 30 days. Remember, it is important that you keep on top of collections or you will go under!

I do agree, you need a large amount of cashflow. A bank will be hard pressed to give a line of credit without collateral, but it is the better way to go than a factoring company. Factoring companies make a lot more money and don't take the risk for the return for the amount they are making!

I agree with Mr Broker. 40-60 days is too much grace period. You are in business to make money. There are some customers that will take advantage of you if you let them. Send a letter requesting prompt payment a week before the 21 days (my limit) is up. Fortunately, this issue can be reduced by performing credit check and/or checking references. D&B is worth checking out.

A large amount of financing or cash is definitely helpful for quicker setup but not necessary. All I had was a 25,000 line of credit and a 10,000 business credit card. I was successful because I controlled my expenses but the tradeoff was that it took longer to make profit.

I never used a factoring company so I don't have anything to add on the topic.

Thanks Daniel, I was just looking to find a broker out there that started with meager financing, like you...and like I will soon, yet did smart things like not factoring to make a brokerage work and thrive over time. My hat is off to all those who could secure 100-250K for a start-up but when you don't have that level of capital I am certain that EVERY deal counts. Thanks again Daniel because I am now more motivated and determined than ever!

You can make it work with a $25,000 line of credit and a $10,000 business credit card, but you will have to control your expenses like Daniel, (by the way-the larger credit line will allow you to grow faster). And you can find customers out there who will pay within 14-21 days, but standard credit terms for most companies are 30 days, so don't get your hopes up. Do your research and find out what their credit terms are and then try to negotiate better terms if you need to. Mr. Broker makes it sound like customers are standing in line to use his service, when in reality he is out there calling on customers trying to get their business along with the rest of us.
If you want to do business with large corporations, you will learn that you have to do business on their terms, not yours. I am at a company that does around $30,000,000 a year and we use credit checks, but they aren't a guarantee that you will be paid in a certain timeframe. A company can have a great credit report and begin to pay slow or go bankrupt within a few months.
I am not being pessimistic. You can be successful, but it will take a lot of hard work and I wish you the best of luck.

Hi, what factoring companies are secured, i mean no scams... or is there scam, what i have to watch if i would like to enroll to factoring company... thanks