Here's a reality new brokers underestimate: you usually pay the carrier before the shipper pays you. That credit gap can sink an undercapitalized brokerage. This guide shows how to extend shipper credit safely, protect your cash flow, and avoid getting stiffed.
When you book a load, the carrier delivers and submits an invoice expecting payment in days, while your shipper pays you on 30-60 day terms. You are effectively financing that gap. Multiply it across dozens of loads and you need real working capital, or a strategy to close the gap.
Before you haul a pound of freight for a new shipper, check their creditworthiness. Use Ansonia, Dun & Bradstreet, or the credit data inside your factoring company or TMS. Look at days-to-pay history, liens, collections, and broker references, then assign a credit limit.
A contract option that can advance invoice cash and shift some debtor risk. Read the fee, reserve, and recourse terms before relying on it.
Use your own cash or a credit line to pay carriers and keep the full margin.
Offer carriers quick-pay at a discount, improving your margin while they get paid faster.
Negotiate net-15 or net-30 with newer or higher-risk shippers to shrink the gap.
Solid credit management protects the margin you work so hard to earn, and keeps you able to pay the carriers you vet on time.
Shippers typically pay on 30-60 day terms, but carriers expect to be paid quickly (often via quick-pay or within 15-30 days). That gap means a broker effectively fronts the money, paying the carrier before the shipper pays the broker. Managing this credit gap is one of the biggest cash-flow challenges in brokering.
Use a business credit service such as Ansonia, Dun & Bradstreet, or the credit scores built into many factoring companies and TMS platforms. Check their days-to-pay history, any liens or collections, and references from other brokers. Set a credit limit based on the result before you book freight for them.
Factoring is selling invoices a shipper owes you to a factoring company, usually for faster cash minus a fee. It can fund carrier payments and, with non-recourse terms, shift some credit risk. It does not remove the need for a credit check. Fees, reserves, and recourse terms vary by contract, so compare the agreement rather than assuming a standard percentage.
Credit-check every new shipper, set and enforce credit limits, get a signed broker-shipper agreement, invoice promptly with complete paperwork (signed BOL/POD), and monitor aging receivables closely. For higher-risk shippers, use non-recourse factoring or require shorter terms.
Our course covers credit, factoring, and back-office systems so you never run out of cash mid-load.
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