5 Things You Don't Know About Renewing Your Freight Broker Bond
Summer is here, and your freight broker license and bond renewal may not be on your mind right now. And while some well-deserved relaxation is needed, it’s also a good idea to consider your license and freight broker bond renewal early on to avoid potential pitfalls.
As freight brokers in the transportation industry know very well, the BMC-84 freight broker bond required by the FMCSA was increased in October 2013 from $10,000 up to a $75,000 amount. To remain in compliance, every broker in the nation had to post the new bond around the October 2013 deadline, and as a result most of the industry is set to renew their bond coverage this coming October. Having an up-to-date freight broker bond means you can continue your operations as usual and stay compliant for your new licensing period, as it is an indispensable requirement for renewing your license.
To help you better understand the BMC-84 bond renewal process, we’ve compiled the top 5 things that freight brokers might overlook when renewing their broker bonds. Getting to know these is sure to keep your bonding process hassle-free. (Spoiler alert: they tend to revolve around avoiding procrastination.)
1. Waiting until the last moment to renew your bond is a bad idea
Many times, getting something done in the last minute can be risky, and this can definitely apply to renewing your freight broker bond. In fact, if you wait too late, your bond may actually end up getting cancelled.
In most cases, the bond renewal process goes rather fast. But when thousands of freight brokers need to renew their bonds around the same time of year, which will be the case in October as it coincides with the 2013 bond increase, things might get a bit more complicated. Waiting until the last possible moment puts you at risk of unexpected delays due to the volume of clients that sureties will have to deal with.
Instead of postponing the renewal until the end of summer, starting the process now is a smart move. Staying ahead of the game with your freight broker license renewal means you can get this done before everybody else and avoid unexpected delays. Then you can fully focus your energy on your business, rather than dealing with unpleasant surprises in the form of administrative burdens.
2. Paying your renewal by the actual Due Date is important
While your surety bond renewal might seem far away, keep in mind that the payment of the bond needs to be done 30 days before your bond expires. The reason is that the FMCSA requires surety companies to submit a written notice about bond cancellations 30 days before the date of cancelling it. This clause is integrated in the freight broker bond language. This is why your renewal due date is typically 30 days prior to the expiration of your bond term.
Your surety will send you a renewal invoice between 60-90 days before the bond expiration date. Due to the advance notice, you might be tempted to ignore it for some time, as it seems so far in the future. However, getting the payment taken care of as soon as possible will give you security that your business will remain in compliance, and won’t have to deal with headaches caused because of missing that deadline.
This is a wise step, especially considering that if you forget to make the payment, your bond will be cancelled. Reinstating it can be quite difficult and time-consuming, especially when thousands of brokers are trying to renew around the same time of year. Thus it is definitely in your best interest to make sure you pay for your freight broker bond renewal on time, as failing to do so can create a major disruption to your business.
3. Shopping around too much can negatively impact you
In today’s day and age, with online commerce, a freight broker can receive multiple bond quotes from the comfort of their home computer or mobile device. As a result, it can be quite tempting to look for the lowest bonding rate on the market and apply with a few different bond agencies for comparison. It goes without saying that getting the best possible price for your broker bond is critical.
However, be aware that shopping around too much can harm your personal credit. Why? Because if you apply for a bond with a number of different agencies, it is likely that each of them will submit a credit report inquiry. Getting all these inquiries at once can unnecessarily lower your score.
Instead of wasting your time and jeopardizing your credit, it’s much better to look for a solid surety agency from the start, and preferably one that will not do a hard pull or your personal credit, but instead a soft pull. Furthermore,inding the right bond agency from the start will guarantee that you get a good deal immediately because of its access to the best bonding markets.
4. The bond price is not the only thing that matters…
As just explained, when looking for the best price, it can be quite tempting to shop around. Paying a reasonable sum for your bond is obviously important, especially considering all the expenses that a freight broker is facing. But make sure you don’t choose your surety bond provider only on the basis of the price tag.
For instance, in the event that a claim is filed on your bond, the actions of your surety agency are very important, so that you avoid unpleasant repercussions. If the surety agency is knowledgeable and experienced, it would be able to help you out.
In such cases, if the bond agent takes the role of your advocate, facilitates the flow of information, and fights for your interests, you’re much more likely to get the potential claim resolved before it becomes a bigger issue. Believe it or not, there are bond agencies out there that could care less about assisting you with claims. Do you due diligence to ensure you get bonded with an agency that takes claims seriously.
5. ...But you can definitely lower the bond cost over the years
That being said, it’s absolutely possible to lower your bond cost between renewals. You just have to work on improving your overall financial stats. Then it’s very important that you show your progress with financial statements or through an improved credit profile.
As the price of your bond is formed on the basis of a complete examination of your business, including your credit score and financial stability, the most direct way to decrease your bond cost is to improve your credit. If you’ve made effort throughout the year to do that, make sure you demonstrate that to the surety provider.
Finally, don’t forget that the bond price also depends on the surety agency you’re using. Choosing an agency with top freight broker bond programs guarantees you will get the best available rates. The most connected bond agencies will be able to shop around for you in order to find you the lowest price, even if you have to renew your bond with bad credit.
Hopefully, these five important reminders will be of assistance as you prepare to renew your freight broker bond in the coming months. In case you have further questions or you’d like to share your experience with bond renewals, don’t hesitate to share your thoughts in the comments below!
Vic Lance is the founder and president of Lance Surety Bond Associates. He is a surety bond expert who helps freight brokers get licensed and bonded. Vic graduated from Villanova University with a degree in Business Administration and holds a Masters in Business Administration (MBA) from the University of Michigan’s Ross School of Business.