Starting A Lumber Brokerage (small-time)


From original questioner:

Hi everyone,
First post on this forum. Seeking some advice. So here is my situation, I'm not in the wood business, however, I've been learning over the past few months. I have in my network, multiple potential buyers in Europe interested in exotic lumber from Latin America. I've been in touch with saw mills in Colombia. There's def a spread to be made here and naturally I'd like to capitalize on this opportunity. One way of course would be to get into an agreement with supplier for a commission (w/o any investment/risk on my own), but the risk with that (as I've already experienced), is you get cut out from future orders. I'm exploring doing it as the actual middleman/broker by selling direct to the buyer. At any rate, want to start small. Obviously I have no credit history as a broker, sure I can have verifiable operating capital, but no history that can ensure trust from both seller and buyer. So lets say I get a 20-25% deposit from the buyer, give it to the supplier. For the remaining payment I expect (1) the supplier to expect full payment prior to container arriving at buyer port and (2) buyer to expect inspection of goods (at port?) prior to releasing remaining payment (via escrow perhaps?). So that leaves a window where I, as broker, will have to front my own capital to purchase the lumber from seller before arrives at buyer port, and expect to have funds released by buyer via escrow upon inspection. I would like any experts here to chime in ,give me any advice. I want to mitigate my risk as much as possible. I was thinking to hire an expert/professional in lumber grades/trade in Colombia, on a contract by contract basis, to inspect/count/verify that specifications are exactly to the buyers expectations, prior the shipment leaving Colombia. The big risk here obviously is claims, what could happen, and how are claims resolved? Buyers order does not meet specifications upon inspection, something wrong with the wood, etc. How do I mitigate risk? Can I insure the order as well? I've got my training wheels on here. Thanks everyone for your time.

From contributor ma

It's pretty easy: small-time brokerage is buying what you think will sell, then selling what you've got. No need to prove any credit-worthiness or worry about claims, just good old fashioned risk. It has been a great gig for lots of folks in the past; perhaps, it still could be.

From contributor ri

HMMMMMMMM, what could go wrong dealing with a 3rd world country? Are you familiar with payoffs and corrupt local government officials? Government regulations for the harvest of their timber? I can't imagine all the possibilities of knowing all the pitfalls in advance. We had a local guy dealing with black palm flooring. One really big shipment turns out to be a container of wet/molding variation of mahogany instead of the flooring. No one knows how that happened, and he makes another trip to Cambodia. If you like flying into little airports in 3rd world countries, it sure would be an adventure!