The cost of a freight broker surety bond is determined based on three factors: 1) the business owner’s personal credit, 2) business experience, and 3) financial strength of the company. Unlike with a Trust Fund Agreement (BMC-85) where full collateral may be required, a Freight Broker Surety Bond (BMC-84) allows freight brokers and forwarders to instead only pay a percentage of the total bond amount, in the form of annual premium, without the need for any collateral.
With the new transportation law, Moving Ahead for Progress in the 21st Century (MAP-21), freight brokers and forwarders have a higher surety bond requirement they need to cover annually. The surety bond amount jumped from $10,000 to $75,000 in October 2013. Naturally, the increased risk to the surety comes at a higher cost. BMC-84 bonds are underwritten more strictly than other license bonds, due to the large bond amount and the inherent risk of claims for this financial guarantee. While each bond application is underwritten individually based on a variety of factors, the following table offers a sample range for estimated premium:"
|Good Credit, Experience||Bad Credit, Lack of Experience|
Bad Credit Surety Bond Program
If you have bad credit (a FICO score of <650), your freight broker bond cost will typically be higher due to the risks involved with bad credit applicants. You can still likely get one though, and at a reasonable price. In order to find out what your premium will be, you first have to apply online to receive a quote at no cost and free of any obligations. You will then be contacted by an agent with the exact amount that you will have to pay for your freight broker surety bond.
How To Lower Your Freight Broker Bond Cost
It is possible to lower your freight broker bond cost over time. Steps which you can take to tilt the scales in your favor include:
- Provide strong financial or business statements
- Take steps to improve your personal credit score
- Own strong liquid assets and provide cash verification
- Work with the right surety bond agency
Working with the right agency is a major determining factor of freight broker surety bond cost. You’ll want to find a bond agency with access to the best programs on the market, such as Lance Surety Bonds. Through strong relationships with a number of A-rated and T-listed surety bond companies, we have access to exclusive programs not offered to most agencies. A good bond agency will also work with you to find ways to strengthen your application, such as requesting additional documentation that can work in your favor. Finding the right bond agent for your freight brokerage will undoubtedly reduce your overall bonding costs.
And since you have to renew your freight broker surety bond on an annual basis, you will always have a full year to improve your credit score and get an even lower premium next time around.
How Freight Broker Surety Bonds Work
The Federal Motor Carrier Safety Administration (FMCSA) requires that all freight brokers and forwarders obtain a freight broker surety bond as part of the freight brokerage licensing process.
A surety bond is an agreement with three participant sides to it: the principal, the obligee and the surety. The surety is the side that, by issuing the freight broker bond, guarantees to the obligee that it will protect it from harm which may arise if the principal engages in fraud, abuse and other unlawful activities.
Freight broker surety bonds are meant to protect shippers and motor carriers and the contractual obligations that freight brokers have towards them. If, for example, a freight broker should refuse or unreasonably delay payment, the freight broker surety bond goes into effect and shippers and carriers receive compensation.
Get Your Freight Broker Surety Bond Today
Want to know the cost of your freight broker surety bond? Apply online for a free BMC-84 bond quote! Or call us at 877.514.5146 to speak to one of Lance Surety Bond’s licensed bond agents. They will make sure to provide you with all the information you need.