It can seem extremely daunting to jump from being a truck driver to becoming a freight broker, someone who can act as an intermediary between the shipper and the person or company providing transport. But for those who have made the transition, it can unlock an entirely new revenue stream and bring a serious boost to their profits.
Of course, making the decision to get your carrier authority should come only after careful research and consideration of all the pros and cons. Getting a carrier authority is not for everyone, and so it pays to do your homework before getting started. Of course, there are also plenty of myths out there that can make it very confusing for people new to the industry.
Today’s post will look at what exactly a carrier authority is and attempt to dispel some of the main misconceptions. The bottom line is that having your own carrier authority is a great way to expand your trucking business and boost your earning potential.
What is a carrier authority?
As anyone who’s spent any time in the trucking industry knows, there are a lot of rules and regulations, both at the state and federal level, that drivers and freight companies must follow in order to do business. Of course, most people are familiar with the need for a commercial driver’s license, or CDL, to driver tractor-trailers, but that is only one step in the process.
For drivers who want to operate their own business, and have the ability to contract loads and perhaps even hire other drivers, it’s necessary to have what is known as a carrier authority. Also known as an operating authority, this is a certification granted by the Federal Motor Carrier Safety Administration (or in some cases a state transportation agency) that legally allows an individual or a business to engage in for-hire transportation with a motor vehicle.
There are different types of authority that can be obtained. A common authority allows carriers to provide for-hire transportation to the public. A contract authority is different in that it allows carriers to provide for-hire transportation to individual shippers, based around contracts. Finally, a broker authority is necessary for a company to arrange for the transportation of cargo that is owned by someone else by carriers that are for-hire.
For truck drivers, it’s these last two types of authorities that matter. Many brokers and fleets started out as companies run by a single driver who expanded to include multiple drivers and eventually act as a broker.
On top of all this, drivers and fleets must also determine whether they need an Interstate Operating Authority, which allows for the transport of goods across state borders. This will generally be required unless you are driving only within your home state, or you operate in a municipal area that crosses through more than one state, such as the DC region.
How can someone apply for a carrier authority?
Applying for a carrier authority can be a complicated process, which is one of the reasons many drivers are reluctant to take the leap. First off, prior to initiating the process, it’s necessary to do a number of preliminary steps.
Obviously, you’ll need to determine which type of authority you’ll need to operate your business. You’ll also want to make sure you have a business name, EIN number, and a business license. This might be an LLC, C Corp, S Corp, or some other business structure depending on your specific circumstances. You’ll also be wise to get pre-approved for liability and cargo insurance.
Next, apply for your MC number at the FMCSA website. This Motor Carrier number is required of all transporters who intend to carry regulated commodities across state lines on a for hire basis.
You’ll need to fill out more paper work for your operating authority. This includes the OP-1 or OP-1(P) form, as well as the BOC-3 form. Next, there’s the Motor Carrier Identification Report (MCS-150) along with the Safety Certification Application. This will get you a USDOT Number. You’ll also be asked to provide proof of insurance.
Then you’ll need a UCR permit and pay the Heavy Vehicle Use Tax, followed by filling out an International Registration Plan. Likewise, it’s necessary to establish an International Fuel Tax Agreement (IFTA) account, and enroll in an FMCSA approved drug and alcohol testing program.
No wonder so many drivers are hesitant to apply for a carrier authority.
What are the biggest myths about a carrier authority?
There is a lot of misinformation out there about a carrier authority. First of all, after everything written above, it would be easy to wash your hands of the whole business and assume the process is too difficult. But this is not true. In fact, there are a number of services that work with drivers who want to get their authority and help simplify the process for them.
Another common misconception among truckers, especially those starting out, is that you can act as a freight broker without a getting your license. This is not the case. FMCSA requires everyone engaged in brokering activities to be fully licensed and registered first.
This error often stems from the confusion over the difference between freight brokers and freight forwarders. These are two separate jobs in the transportation industry. The former acts as a go between for shippers and carriers, bringing the two together. Forwarders, on the other hand, actually take full charge of the cargo, and are working for the shippers during the entire transport process.
Also a myth is the assumption that it’s not possible to qualify for a freight broker license without having at least $75,000 in savings. It’s true that it’s necessary to show that you have the financial security to cover a $75,000 loss, but this can be done by acquiring a surety bond. This will entail putting down a small upfront sum based on your credit history and business finances.
Along the same lines, people often decide against even trying for their carrier authority because they have a bad credit history. But in fact there are many options for drivers who have suffered financial problems to apply for a bad credit surety bond. The rates may be a bit steeper than for those with a stronger financial record, but they normally aren’t prohibitive.
Finally, one last excuse people give for avoiding a carrier authority is they claim that you need to have your own customers before starting your own business. However, thanks to load boards and other online tools for connecting with shippers around the country, it’s possible to start finding customers the very first day you launch your business.
What is not a myth is the importance of finding the right partners for your trucking business.
Saint John Capital Understands Trucking
Saint John Capital has more than two decades of experience in the trucking industry. During that time, we’ve worked with drivers and fleets of all different sizes, so we know how difficult it can be for small business owners to thrive in such a competitive environment. Whether or not you have your own carrier authority, or are just thinking about applying for the first time, finding the right partners can be the most important step to improved business success.
From the very start, our company has focused exclusively on the trucking industry. That means we have 25 years working with truckers just like you, helping them to better manage their cash flow and grow their business. Whether you have one truck or a hundred, the key to being profitable is to find value everywhere you can. With the full range of services offered by Saint John Capital, including factoring, fleet card programs, and more, it’s easier than ever to build a lucrative career in the freight industry.
Contact one of our friendly customer service representatives today to learn more.