It’s that time of year again, when it’s time to talk about freight broker bond renewal. Two years ago it would’ve been a rare occurrence for most freight brokers’ deadlines to align at the same time. However, many of you will remember the controversial MAP-21 law passed in 2013. It upped freight brokers bond amount and set a nationwide deadline of Oct. 1 with a grace period extended till Dec.1
Since freight broker bonds and licenses are renewed annually, this means yet another deadline is approaching for everyone who stayed in business after the $75K increase, i.e. for the majority of freight brokers. As renewal is an important expense for everyone, people often have various questions, so let’s look at some of them to give you a better idea and make your life easier.
Back in 2013, the more than sevenfold increase shocked people, so some entertained the idea that a pushback could lower prices again. Unfortunately, even after several industry groups filed a lawsuit, a decrease failed to be negotiated. As a result, it’s probably unrealistic to expect a reduction to the broker bond amount anytime in the near future.
In any case, postponing renewing your bond for the very last minute with the hope that the FMCSA will bring the amounts down is not the wisest choice. In fact, starting early can give you more time to compare offers and prevent any potential lapse in bond coverage.
Technically, you should make your bond payment no later than 30 days before your previous freight broker bond expires. The BMC-84 Bond carries a 30-day cancelation clause, which means that the bond company must stay on the bond for an additional 30 days after sending out the cancelation notice to the FMCSA. This is why renewal payment is typically due 30 days before the expiration date of a policy. But as previously mentioned, waiting until the last minute to renewal your freight broker bond can be a bad idea.
The logic behind that is that many brokers tend to postpone renewal as much as they can, so there are many requests for renewal right before the deadline. This can cause delays, and there’s a chance your bond is not renewed on time. This is particularly true around October 1st of each year, as over 70% of the industry will be renewing their bond policies around this time.
Remember: it’s illegal to broker even a single piece of freight if your license expires. Your bond is filed electronically and your license status is available for everyone to see. Don’t risk losing business just because you missed a deadline. Staying ahead of the game will give you peace of mind.
Speaking of starting early, you may ask yourself if you should try a different approach this year by changing your surety provider.
The answer is: it depends. If you are happy with the services and the quotes of your current agency, it probably doesn’t make much sense to shop around. Additionally, if you shop around too much, and have a bunch of bond companies pull your credit, you may actually cause damage to your personal credit. If, however, you feel like you are paying too much, changing you surety agent to find a better fit for your company can reduce headaches and ultimately save you a lot of money.
Since they do most of the shopping for you, if you choose the right bond agency, they can negotiate a better deal on your behalf, as not all bond agencies are created equal or have access to the same specialty programs. Hint: Look for an agency that has many partnering sureties. The most trustworthy surety companies will be A-rated and T-listed.
Even though the bond amount is set at $75,000 you are right to ask this question as freight broker bonds are most typically paid in either annual or quarterly premiums. The costs can vary from year to year based on a variety of factors: your credit score, potential credit issues, years of professional experience, and the strength and liquidity of your financial statements.
Finding a bond agency with access to the most aggressive rates is one of the biggest keys to saving money. Once you’ve found an agency you’re comfortable with, be sure to provide them with as much information as possible and your quote will be as accurate as possible. There are programs available to some agencies that are based solely on credit, but other markets require full underwriting with business financial statements. If you’ve received a credit based quote, but would like to try to reduce your premium, consider submitting additional documentation to strengthen your financial position. This can often have a positive impact on what you end up getting quoted.
Have many more questions that are left unanswered? Be sure to check out this full guide to freight brokers bond renewal which goes into great detail. If something is still unclear, leave us a comment in the section below, and we’ll do our best to help.
Work-life balance has become one of the central issues of the 21st century. It’s an idea praised and discussed in countless articles, meetings, and studies. But in most jobs, the basics are fixed and there’s only so much you can do to change them. The problem is that the right balance between work and the rest of life is different for everyone. So what can you do to find your right formula and then live it? Start by choosing the right industry. Frankly, one of the best fields currently out there is freight brokering. Brokers somehow seem to have found the right formula for striking their own perfect balance. With new technology firmly on their side, and freight broker bonds ensuring high industry standards, today’s freight brokers are showing the rest of us how it’s done. But why are freight brokers particularly good at this?
Henry David Thoreau knew it in 1854 and some of the most successful people in our society today know it now: defining your own success is critical to job satisfaction. Whether you’re struggling to meet someone else’s definition or feeling bored by low expectations, working under someone else’s ideas of success can negatively impact your work and your life. How do freight brokers avoid this? Whether you’re an independent broker or working as an agent for a company, you’re not working under quotas. Because you’re paid on commission, you can choose your own schedule; you’re in control of your salary and hours. So, if you need to work more one month, do it. If you need some time off to get some rest, no problem. You can even combine work and relaxation by working anywhere with an internet connection!
It’s a cliche to point out that everyone’s work habits and preferences are different, but that doesn’t make it any less true. Most jobs force workers into a set work pattern and style, which works for some, but not for most. At the same time, while some people dream of working from home, for others it proves difficult. What’s great about being a freight broker is that the choice is totally yours. If you have a family, you can spend time with them by working from home. If you’re single and like working in a shared office space so that you can be around co-workers you enjoy, you can do that as well. You can even find some combination of the two, which works best for you. Knowing you have the option to change your work setting makes a huge difference. Thus, get yourself a 4G phone and go camping — you can work while fishing in the middle of a beautiful lake or under a sky full of stars — or make a habit of getting into the office every morning at 9. What matters most is that you figure out what works best for you.
Many of us remember the era when technology promised to open up vast new swaths of leisure time. It hasn’t exactly worked out that way. In today’s world, technology too often ends up allowing work to invade our personal time. But that doesn’t have to be a bad thing. When you’re a freight broker, being available to your shippers and carriers is an essential part of the job. So, while for some industries this technological intrusion is a problem, for freight brokers, it makes accomplishing the basics simpler. At the same time, with the cost of brokering essentials (like a laptop, an internet connection, and a smartphone) decreasing all the time, technology is making brokering easier every year. When you combine this with the abundance of brokering software out there, it’s easy to see why brokers have technology on their side like a fairy godmother.
For many people, what’s most appealing about being a freight broker is the independence it offers. But working on your own is often intimidating. Fortunately, it’s entirely possible to be a fully independent broker, but still get the help and advice you need when you encounter difficulties like delinquent payments, complex software, or legal claims filed against you. This is where it becomes essential to build a solid network of support with people like your lawyers, long-term carrier partners, and your surety bond agency. For the latter, in particular, make sure you find a reliable agency with a positive attitude and the expertise to help you avoid claims and/or deal with them, if they should occur.
If you combine all these elements, it’s clear how freight brokers are able to maintain high levels of job satisfaction and great work-life balance. Because when it comes down to it, the key is having the flexibility to find what works for you and stick with it. There’s no one-size-fits-all work-life balance, so it’s always going to be tough for a company to create it from the top down. With brokering freight, you can craft the perfect job-style for your lifestyle. Whether you’re a freight broker or not, how do these elements factor into your work-life balance? Let us know what you think in the comments section.
Editor’s Note: This is a guest article from Vic Lance, founder and president of Lance Surety Bonds Associates. Cerasis is not only a provider of transportation management services, but also provides services like other freight brokers to arrange for full truckload shipments. However, our technology, the transportation management system we call the Cerasis Rater, empowers shippers to book their own shipments with rates of their own or rates we negotiate on their behalf. We then offer ancillary services related to freight shipping like accounting (freight audits and payments), freight claim management, and other technology solutions such as deep reporting and analytics as well as eCommerce freight shipping solutions.
Dear freight brokers, no matter how big, small, or independent, how much work you get and how much money you earn will depend solely on you. That’s why it’s essential to establish good relationships with shippers, in order to help their business thrive and have a constant flow of clients.
While every shipper may have their own criteria as to what they are looking from freight brokers chosen to do business with, there are certain things everyone wants to know about you before they trust you with their freight and ultimately their business reputation with their own clients. Knowledge of these things will help you be better prepared to answer shippers’ questions and meet their expectations. Here are six of the most frequent ones.
Speaking of carriers and insurance, now is the time to say that shippers would want to know what selection method you use to pick carriers. Whether the carriers have insurance themselves will be an important part of that question. After all, they want to make sure that they will be covered should something happen to the cargo they shipped. Shippers may ask about about your carrier safety record, as well as whether you have outlined all terms and conditions in a written contract. Verbal agreements and generous promises won’t get you far.
There’s nothing wrong with being a small operation, even a one-man operation, as long as you don’t take more work than you can handle. Still, many shippers may ask that question and freight brokers may feel pressured to exaggerate the number. But for establishing long-term relationships honesty is the best policy. Shippers may also ask how many years you have been in business, because they will take that as a measure of how reliable you are.
While truckload motor carrier services are the most common, some shippers will ask you if you are also using other modes, such as LTL, vans, air freight, rail intermodal, to name a few. They do that for two main reasons. First, having multiple options means that you can be more flexible, so if the cargo can’t be shipped through one mode, you will quickly find another. Second, it means that you have many partners and can probably offer more than one option for each of the modes.
A frequent question you may encounter is one about your financial stability. Shippers normally have a lot at stake, and will want to make sure that the freight broker they do business with doesn’t have any financial and credit problems. They may want to look into your finances and possibly run a credit check at the Red Book Credit Services. If your business is profitable, this is a green light for shippers. In addition, be ready to answer questions regarding your payment methods and how quickly you compensate carriers.
This will likely be the number one question on any shipper’s list. A freight broker bond means you are properly licensed and bonded. A freight broker bond is also designed to protect shippers in case you are not keeping your contractual agreements and are delaying payments. The FMCSA contains a searchable database of all licensed and bonded freight brokers, which means shippers might not ask you directly whether you’re bonded. Still, it’s a good idea to keep maintain proof that you’re bonded (via your Motor Carrier Report) that can be shown upon request.
There are different types of cargo insurance for freight brokers, but luckily you don’t need them all. Shippers are likely to ask whether you have contingent cargo insurance. Even though you are not physically handling freight, if a shipment is lost or damaged, the carrier may not make good on the claim. This is when your contingent cargo insurance kicks in to cover the losses. You are not obliged by law to have this insurance, but both shippers and carriers are likely to ask you and be more willing to work with you if you have it.
In your daily work with shippers you have probably encountered many such questions. Can you share some of them for your fellow brokers? What strategies are you using to establish long-term relationships with shippers? Leave a comment in the section below.
According to some industry estimates, half of the 21,000 freight brokers in the States are still not compliant with the new $75,000 surety bond requirement. More importantly, after the 60-day grace period ended on Dec. 1, close to 3,000 have had their licenses revoked.
The previous bond requirement was set at $10,000. The increased freight broker bond (BMC-84), set at $75,000, is supposed to safeguard carriers and shippers from infringements such as untimely payments. It is meant to improve the safety and control over the process of cargo delivery, and it also included freight forwarders in the new rule.
The increased freight broker bond requirement that was set in motion with the MAP-21 legislation in July 2012. The Congress passed the new legislation and later signed it into law. It is fair to say that adapting to the new bonding situation has not been easy and smooth for all operators. Due to various complaints, the Federal Motor Carrier Safety Administration (FMCSA) extended the deadline for compliance with the new rule by 60 days until Dec. 1.
The 60-day grace period for Freight Brokers
The FMCSA decided to provide a two-month period for compliance because it received numerous complaints and even a lawsuit, which was unsuccessful. Freight brokers could still operate until Dec. 1 with their old bond.
Warning notices were sent out on Nov. 1, informing the parties concerned that if they didn’t pay the higher bond their operational authorities would be revoked. The estimates are that some 9,000 brokers have received such notices. It is hard to measure, however, whether they have had their license revoked, or decided to surrender it because they couldn’t pay the bond.
Starting Dec. 1, FMCSA allowed another 30 days until the beginning of 2014, for those who waited to the very last minute to give them a last chance to renew their license.
Options for compliance
To comply with the new requirements of the FMCSA, freight brokers need to either obtain a freight broker bond (BMC-84) or a trust fund (BMC-85).
The trust fund option is less favorable for small and mid-sized freight brokers. The BMC-85 means that you have to deposit $75,000 in a bank in order to guarantee your license. This can be cumbersome or even impossible for some brokers. Borrowing such an amount can also affect negatively the broker’s credit score.
Some surety bond agencies might not agree to backdate the bond, which can seriously jeopardize the functioning of the freight broker. Obtaining a bond as soon as possible also means that brokers might still find surety bond agencies such as Bryant Surety Bonds that offer good deals for the bond price. The agency can write these bonds year round, and even backdate the bond to an Oct. 1, 2013 effective date.
It is preferable that the bond is written with a back date to eliminate any questions of compliance and an unnecessary risk. Bryant Surety don’t require collateral, and most applications get approved, with good or bad credit. The only exceptions are open bankruptcy and unpaid child support. Apply today!
To subscribe to our blog, enter your email address below and stay on top of things. We'll email you with a confirmation of your subscription.
Send this to friend