Selecting the Right Transportation Broker for Your Business

Enlisting the help of a broker can be an efficient way to alleviate one of the most time-consuming transportation tasks – finding carriers to cover your lanes. However, not all brokers are created equal. Each has their own network of carriers with unique specialties, their own approach to customer service, and varying lane coverage. 

It’s important to select a broker who truly understands your business and aligns with your needs.

Quality carrier network. The most significant aspect of a quality carrier is their commitment to safety. Talk to potential brokers to better understand how they select their carriers. The best brokers will only work with companies who have a Federal Motor Carrier Safety Administration (FMCSA) rating of satisfactory or better. It’s essential to make sure your broker’s carriers meet the minimum liability insurance requirements – some brokers even require carriers to exceed these amounts.

Customer service. If something goes wrong with one of your shipments, or a change needs to be made in the 11th hour, it’s important to work with a broker you can count on. Look for companies that offer 24/7/365 on-call support to ensure safe, on-time arrival of loads.

Diverse solutions. Whether your company needs interstate, intrastate, or international lanes, it’s key to work with a broker who can offer diverse options. So, as your business needs change, you can be confident your coverage requirements are being met.

Brokers who offer access to a variety of modes and specialized equipment can provide you with superior solutions for your specific product and shipment needs. Some of these include:

Modes	Specialized Equipment
Rail/Intermodal	Flatbed
Less-than-Truckload (LTL)	Heavy Haul
LTL Pools	Curtain Side
Truckload (Dry Van and Refrigerated)	Conestoga
Multi-Stop Truckload

Do you know the true cost of your asset-based loan?

Asset-based lines of credit are a popular finance tool most businesses use to unlock capital held in inventory. Wide utilization, however, does not imply that everyone understands their true cost. When figuring the total cost of money, there is way more to consider than just the upfront interest rate for your loan. Below are just a few items to consider when comparing financing options.

• Advance Rate. Not all lines of credit are equal and certainly not when it comes to advance rates – the percent of inventory value the bank will loan on. Low advance rates prevent you from realizing the full potential of the inventory value, meaning a sizable amount of cash is still tied up in the product. Any way you look at it, that’s a cost – and quite often, a major one. Obviously, the closer you can get to a 100 percent advance rate, the better.

• Focus on fees.  Doing business with banks brings a variety of fees, such as loan origination fees, unused line of credit fees, service fees, fees applied for flexing the line up or down, and termination fees. When all those charges are added up, a 3.00 percent rate can quickly rise by ¾ of a percent or higher.

• The value of equity. If companies are going to fall down anywhere in the finance process, it is in undervaluing their equity. In order to accurately compare finance packages, companies cannot discount this cash outlay. They must determine an ROI that they could expect had those dollars been used for additional production or investment. After all, nobody hands out cash without an expectation of a return. This number absolutely must be figured into that total cost of money. And once it is tallied, that initial upfront interest rate undoubtedly will rise.

So as you shop for asset-based financing, the goal should be to maximize the advance rate, reduce or eliminate fees, and minimize the cost of equity through a low or no down payment.

So what does all this mean? Just how much do these costs impact the interest rate

Consider a $15 million line at 2.75 percent. We’ve already established that fees, alone, can drive costs up by $317,953.

If you look at the equity required to support the difference between the advance rate and the value of the product, you will be required to come up with roughly $4.3 million in cash. If you assess a value of 10 percent to the cost of this required equity, that adds an additional $431,250 to the cost of the line of credit.

That brings the total cost of debt and equity to $749,203 and shifts the previously low 2.75 percent interest rate to 4.99 percent.