The Ultimate Freight Broker Bond Renewal Guide
If you’re working in the freight brokerage field, you know how important it is to keep your FMCSA freight broker license and freight broker bond up-to-date. Staying compliant means staying in business.
That’s why keeping track of the deadline for your freight broker bond renewal is important. Getting started as early as possible is crucial for ensuring your brokerage can keep its operations running without a break.
As renewing your bond can be a confusing process in some cases, we’ve compiled thorough answers to the most frequently asked questions that freight brokers have when the renewal time gets near.
Wherever you are in your license cycle, these useful tips will help you plan your surety bond renewal better. This will allow you to stay on top of your game, so you can truly focus on developing your brokerage business.
When should I renew my freight broker bond in 2016?
Typically, payment needs to get through at the latest 30 days before your bond expires. The reason for the earlier payment deadline is the bond cancellation policy of the FMCSA. Surety companies need to provide a written notice to the FMCSA 30 days before a bond is about to get canceled. This clause is also included in the freight broker bond language.
The expiration bond of your freight broker bond varies, but for the vast majority of brokers it is going to be Oct. 1, as this was the date set by the FMCSA in 2013. When the value of the bond increased to $75,000, all brokers currently in business had to renew their bond before Oct. 1, 2013. Since freight broker bonds are valid for one year, this means that brokers who stayed in business typically renew their bond at that time each year. For everyone else, the deadline is simply one year after they first got their freight broker bond.
The closer we get to October, thousands of freight brokers will be trying to get their bonds. This can cause unexpected delays and complications and put you at risk of bond cancellation if you postpone renewal until the very last moment. This is why we always advise dealers to start their bond renewal early.
What happens if I miss the payment renewal deadline?
In case this still happens, you can try to get your bond reinstated. However, this is a difficult and time-consuming process and there are no guarantees that you would manage to complete it before your renewal deadline. This could mean that you have to stop your operations until you’ve settled the issue.
How does the FMCSA know that my bond was renewed?
Today the freight broker bond filing process is done electronically, taking away all burden from the broker. Once it has been accepted by the FMCSA, it becomes visible to everyone in the FMCSA’s Licensing and Insurance Database, including the shippers and motor carriers that you work with.
The freight broker bond is continuous, which means that it will appear as active unless your surety provider specifically cancels it because of failing to pay your renewal or having unpaid claims on it. As long as such cancellation has not been done, your bond is operational with the FMCSA.
Do I need a hard copy of the bond?
You don’t need to worry about obtaining a hard copy of your freight broker bond. Your surety will file electronically your BMC-84 bond with the FMCSA. You can verify that your bond is accepted in the FMCSA’s Licensing and Insurance Database.
In case you do want to keep a hard copy for your records along with the electronic filing, you can request one from your surety agency.
How can I lower my freight broker bond cost?
When you apply for a freight broker bond, the surety examines your personal credit score, as well as business management, professional experience and overall finances. This evaluation is needed to judge the risk involved with guaranteeing for your brokerage in front of the FMCSA.
The better your credit and overall performance are, the lower the freight broker bond cost will be. That’s why it’s absolutely possible to decrease the bond price over the years. Besides, just by earning experience in the field you are likely to pay less, as this is a factor sureties consider.
The most effective way to reduce the costs now is to work on improving your credit score and clearing any negative items from your history such as liens, judgments and other problematic records. It’s also important to demonstrate to your surety agency what steps you have taken to improve your credit, as well as to showcase your financial statements and their strength.
Another important factor for reducing your bond cost is choosing carefully your surety agency. Make sure you settle for an established, solid provider that has access to multiple surety companies and thus can shop around for you to get you the best rates. even if you have to get a renewal with bad credit.
Is it possible that my freight broker bond cost increases from year to year?
If you focus on running your business diligently and make sure to work on your finances and overall solidity, your bond price is not likely to grow. Surety companies are making efforts to keep rates at their current levels, unless it is really unavoidable, such as when legislation changes require the bond amount hikes.
If you feel like your premium is too high, you can also talk to your surety bond expert and ask them with help on strengthening your application.
With these most common questions about the freight broker bond renewal answered, you’ll hopefully have an easier and cheaper renewal procedure. In any case, getting well acquainted with potential pitfalls and best practices means you’re well prepared to handle your licensing and bonding.
What else is new for freight brokers in 2016?
Concerning freight broker bonds, there hasn’t been anything new in 2016. Brokers who have made use of the BMC-85 trust fund option, however, should know that earlier this year the FMCSA held a roundtable to hear comments and complaints related to certain trust fund practices, which may not allow for proper compensation of affected parties. For this reason and many other, here at Lance Surety Bonds we always recommend that freight brokers satisfy the financial guarantee requirement by posting a freight broker bond (BMC-84) instead.
As for the state of the industry, it clearly bodes well for it that the number of registered freight brokers have been steadily increasing for each month of the year, reaching 16625 in June, according to statistics from My Carrier Resources.
If you still have questions about your freight broker bond, feel free to leave a comment below or simply contact one of our freight broker bond experts at (877)-514-5146.