A freight brokerage of this size is usually bought with a senior cash-flow term loan or unitranche for the goodwill, an asset-based revolver against shipper receivables to fund the gap between paying carriers and collecting from shippers, and sponsor or buyer equity, often with an earnout or seller note tied to future net revenue. Lenders underwrite net revenue, not gross billings; they test earnings across the freight cycle, shipper and agent concentration, fraud and claims controls, and how the broker authority passes to the buyer.
- Usual structure
- Senior term loan or unitranche, plus an asset-based revolver on shipper receivables
- What lenders size on
- Net revenue and EBITDA through the cycle, never gross billings
- Cash-flow leverage
- Senior lenders commonly 2x to 3.5x EBITDA, measured on a normal year
- Broker authority
- Belongs to the legal entity; a stock purchase keeps it
- Where deals stall
- Peak-cycle earnings, agent-held accounts, and fraud losses
Gross revenue is not the business
A broker bills the shipper for a load and pays a carrier to haul it. The difference, net revenue, is what the business actually earns before its own staff and overhead. Brokers often quote their size in gross billings, and a buyer who prices the business on that figure will be disappointed by the debt.
A simple case in plain numbers: a broker bills 100,000 in a year and pays carriers 85,000. Its net revenue is 15,000. After salaries, agent commissions, software, insurance and rent of 11,000, EBITDA is 4,000. A lender sizes the debt on the 4,000 and asks how steady the 15,000 has been. A small change in the spread per load moves EBITDA a long way, which is why lenders ask for net revenue by month and by customer, not only annual totals.
Buyers at this size include sponsors building logistics platforms, asset-based carriers adding a brokerage arm, larger brokers buying books of business, and management teams buying out founders. The questions below apply to each; an add-on is sized on the combined company. See add-on acquisition financing.
Earnings across the freight cycle
Freight markets move in cycles. When capacity is tight, shippers pay more, spot loads are plentiful and a broker's spread can widen sharply. When capacity is loose, rates fall, contract freight is re-bid and spreads compress. A brokerage's best year is often the top of a cycle, and lenders know it.
Lenders look at several years and at the mix of contract and spot freight. Contract freight with established shippers is steadier; spot freight is more profitable in good markets and scarcer in bad ones. A broker whose earnings came mostly from spot loads in a tight market will be sized nearer its weaker years, and a quality of earnings review will test how revenue is recognized on loads in transit at period end and how accessorial charges and claims are booked.
Price the brokerage on net revenue in a normal market. Lenders will, and the difference becomes equity or an earnout.
The broker authority and the stock-versus-asset question
A freight broker operates under federal broker authority, with a registered bond or trust and a designated process agent. That authority belongs to the legal entity, so the structure of the purchase decides whether the buyer inherits it.
| Item | In a stock purchase | In an asset purchase |
|---|---|---|
| Broker authority | Stays with the company the buyer now owns | The buyer's entity needs its own authority and bond before it can arrange loads |
| Operating history | Continues | Starts fresh; some shippers require a history before they tender freight |
| Shipper agreements and approved-broker status | Continue, subject to any change-of-control clause | Must be assigned, and many shippers will re-onboard the broker |
| Carrier agreements and the carrier database | Continue | Assigned; carriers are re-onboarded in the buyer's name |
| Past claims, disputes and liabilities | Stay with the company, so the buyer takes them on | Mostly stay with the seller |
| The seller's receivables lender and its liens | Paid off and released at closing | Paid off and released at closing |
Because the authority, the history and the shipper approvals are valuable, many brokerage deals are stock purchases, with representations, indemnities and often an escrow to protect the buyer from the company's past. Lenders finance both structures, but the file has to address the liabilities the buyer takes on. See asset vs stock purchase financing and escrows and holdbacks.
Shippers, agents and who owns the relationship
Brokerages are built two ways, and lenders read them differently. In an employee model, salaried or commissioned brokers work shipper accounts the company owns, with non-solicitation agreements and a shared system. In an agent model, independent agents bring their own shippers and carriers and share the net revenue. Agent-driven revenue can walk out the door with the agent.
- Shipper concentration. Lenders look at net revenue by shipper. A brokerage where one or two shippers produce a large share is exposed to a single re-bid. See customer concentration.
- Agent concentration. Lenders ask how much net revenue each agent produces, what the agent agreements say about non-solicitation and termination, and whether the top agents have committed to the new owner.
- The founder's own book. Where the founder manages the largest shippers, the transition matters, and an earnout or rolled equity keeps the founder invested in it.
Working capital: paying carriers before shippers pay
Carriers expect to be paid quickly, and many brokers offer quick pay to attract capacity. Shippers pay on their own terms, often much later. The broker funds the gap, and a growing brokerage needs more cash every month it grows. The acquisition debt does not solve this; a receivables revolver does, and lenders expect it in place at closing.
| Borrowing base item | How lenders commonly treat it |
|---|---|
| Shipper receivables | Advanced at 80% to 90% of eligible receivables |
| Invoices more than 90 days past invoice | Typically ineligible |
| A single large shipper | Commonly capped at 20% to 25% of eligible receivables |
| Carrier payables | Watched closely; unpaid carriers can claim against the broker's bond and pursue shippers |
| Disputed loads and claims | Deducted from eligible receivables until resolved |
Many smaller brokers sell their receivables instead of borrowing against them. That arrangement is paid off at closing from the seller's proceeds and its lien released; a brokerage large enough for a borrowing base usually does better on a revolver. See how a borrowing base works. The purchase agreement must also settle working capital, usually with a target net of carrier payables; see the working capital peg.
How the deal is usually structured
Senior cash-flow lenders to lower-middle-market companies commonly lend 2x to 3.5x EBITDA, and for a brokerage they measure it on a normal year, not the peak. Asset-light brokerages with broad shipper bases and contract freight attract unitranche lenders, usually beside a bank or asset-based revolver, with the two lenders sharing the collateral under an intercreditor agreement. Conventional lenders commonly look for debt service coverage of at least 1.25x.
Brokerage prices are often split: cash at closing, plus an earnout on future net revenue. Senior lenders allow that if the earnout is subordinated and each payment is tested against the covenants first. See earnouts and acquisition debt. A brokerage this size has usually outgrown SBA 7(a), which caps at $5 million and prohibits earnouts to the seller.
Lenders also price the risks particular to the trade: double brokering and carrier identity fraud, cargo claims and the broker's contingent cargo and auto liability cover, shipper credit in a soft market, and the transportation management system and load-board licenses the buyer needs on day one. The comparison with a trucking company, where the trucks are the collateral, is in financing a trucking company acquisition.
What goes in the file
The term loan needs the P&L, balance sheet and debt schedule, with a year-to-date P&L and AP aging where available. The revolver needs an AR aging by customer with days outstanding, an AP aging and the existing liens. The acquisition adds the brokerage's latest full year of figures, never an older year, and the letter of intent. Lenders also want:
- Gross revenue, carrier cost and net revenue by month and by shipper for at least two years.
- Load counts and the split between contract and spot freight.
- Net revenue by agent or broker, with the agent agreements.
- The broker authority, bond or trust, and insurance certificates, with claims history.
- Carrier vetting procedures and any fraud losses.
Senior bankers run every Midas Partners engagement. Once the documents are in, software builds the financing model, lender presentation, blind teaser and underwriting memo in a day, and a senior banker checks every page before the client approves it. The model shows net revenue through the cycle and the borrowing base month by month. Of the 1,800+ lenders in the book, 1,148 write term and private credit and 235 write asset-based loans and lines, so the purchase debt and the revolver can be placed together. See the package.
Common questions
- Can I keep the seller's broker authority?
- Only by buying the company that holds it, in a stock or membership-interest purchase. In an asset purchase, the buyer's entity needs its own authority and bond, and shippers may treat it as a new broker.
- Will a lender lend on gross revenue?
- No. Lenders underwrite net revenue after carrier costs and the EBITDA left after overhead. Gross billings mostly pass through to carriers.
- The last two years were a tight freight market. Which figures will a lender use?
- Several years, with the peak normalized. Lenders look at the contract and spot mix and size nearer a normal market. Where the price relies on the peak, expect an earnout or more equity to close the gap.
- Can part of the price be an earnout on future net revenue?
- Yes, in a conventional deal. Senior lenders allow an earnout that is subordinated to them and tested against the covenants before each payment, and they count those payments in coverage when due.
- Do agent-based brokerages get financed?
- Yes, but lenders discount revenue that depends on independent agents who could leave. Agent agreements with sensible non-solicitation terms, and top agents committed to the buyer, make the file stronger.