If you’re active in the freight broker business, you’ve probably had to renew your freight broker bond these last few summers in order to stay compliant with the Federal Motor Carrier Safety Administration’s (FMCSA) requirement for broker licensing.
Surety bond renewal is an important administrative step that freight broker agents need to take care of, usually on an annual basis. It guarantees that your business meets the legal requirements at all times so your license remains active. Without proper licensing, you risk having your freight broker license revoked and losing your credibility with shippers and carriers.
To make sure this year’s renewal process goes smoothly, here are three best practices that help freight broker agents stay compliant and pay less for their bonding.
Start your freight broker bond renewal on time
Having to stop brokering because you’ve missed the renewal deadline would be a real pain. That’s why it’s a good idea to make sure you stay on top of administrative requirements – and stay in business, unhampered by legal problems.
If you were already brokering two years ago, you went through the FMCSA broker bond increase in October 2013. The BMC-84 freight broker bond was increased from $10,000 to $75,000, a significant raise that changed a lot in the industry. Back then, all freight broker businesses had to either get a new bond with the higher amount or upgrade their bond limits.
As a result, a large percentage of freight agents have to renew their bonds around autumn of each year. If you’re one of them, starting the process in summer is the best approach. With thousands of freight brokers undergoing the renewal process around the same time, delays in renewal are likely, which can jeopardize your license and compliance.
Keep in mind also that even if your deadline seems far away, the bond payment has to be processed a month before the actual expiration of the bond. The FMCSA requires surety companies to send written notices for bond cancellations 30 days in advance. This means that if you haven’t taken steps to renew the bond by then, you might end up with an expired bond. Usually you’ll get a renewal invoice from your surety 60 to 90 days before the expiration, so you have enough time to react and avoid the unpleasant consequences of losing the right to broker.
Fix your financials to get a lower bond cost
Who wouldn’t like to pay less for the freight broker bond renewal? It is definitely possible to reduce your bond cost over the years, and there are a few useful practices in this respect that can save you a lot.
It all starts with understanding how your bond premium is formed. When you apply for a bond, the surety needs to assess the risk associated with providing backing for your business. The more solid your brokerage is, the less you will pay for the bond because you will not be considered a problematic applicant.
That’s why, if you have the chance, it’s a wise step to take care of your financial stats before the renewal. Clearing up old negative items from your credit history, such as liens and judgments, will definitely help to improve the image of your brokerage in front of sureties.
Boosting your credit score is probably the most powerful way to reduce the bond cost. And of course, make sure to showcase the strength of your business in terms of management and finances in general and to stress on the improvements you’ve made.
Look for the best bonding rates – with care
The price you will pay for your freight broker bond renewal is formed on the basis of your credit score and overall finances, but it also depends on the surety agency you will choose to work with. So what are some good practices in this respect?
First of all, if you’re tempted to file bond applications with ten agencies to get a comparison on the prices, think twice. Usually when you apply for a bond, the surety makes an inquiry on your credit. Due to credit card company policies, if you suddenly get multiple inquiries, your personal credit might be penalized permanently and without notice.
Instead of going through all the effort of multiple applications and putting your credit at risk, it’s wiser to avoid shopping around too much, but to focus on making good research of the surety agencies on the market.
The most important tip is to choose a surety provider with years of experience in the field and with a solid reputation. It’s crucial that the agency works only with A-rated and T-listed surety companies because this guarantees the solid backing of your freight broker bond.
Plus, a trustable surety agency would work with numerous bond underwriters, which would mean it has access to the best bonding markets. Thus, it can shop around for you and find the right bonding rate for your specific case.
With a few handy tips in mind, this year’s freight broker bond renewal should run more smoothly for your business. Best of luck on your renewal journey!
A special thanks to guest blogger, Todd Bryant, president and founder of Bryant Surety Bonds. He is a surety bonds expert with years of experience in helping freight brokers and forwarders get bonded and start their business.
Want to work under LDI’s surety bond? Apply for our authorized freight agent program now!