The October 1 deadline for renewing your annual freight broker’s bond and license is fast approaching. Unfortunately, despite the shock and industry opposition following the increase from $10,000 to $75,000 in 2013, there is no point to putting off this expenditure in hopes that it will drop significantly. Instead, here are some tips for easing your bond renewal headaches and cost – even if you don’t have stellar credit – and avoiding any lapse in coverage.
1) Get ‘er done sooner rather than later
First and foremost, your BMC-84 bond renewal is typically due 30 days before your current policy expires. While it’s human nature to wait till the last minute, the flood of freight brokerage policy renewals around October 1 can put your bond at risk of not being renewed in time. (Don’t flaunt the two-month grace period ending December 1.) You can’t legally broker trucking freight without a current license, so save yourself the aggravation and risk of losing business over a missed deadline. Get going on your bond renewal now and make sure you pay the invoice by the due date.
2) Judiciously explore opportunities to save money
An early start gives you more time to compare bond renewal offers and secure the most favorable policy. Costs will vary from year to year depending on your credit score, potential credit issues, years of professional experience, and the strength and liquidity of your financial statements. If you think you’re overpaying for your freight brokerage bonds and are unhappy with your service, another surety agent and/or bond agency may offer more aggressive rates or be able to negotiate a better deal on your behalf.
3) Don’t be pennywise and pound-foolish
Shopping multiple agencies on price can actually jeopardize your credit score and cost you more by generating multiple hard credit inquiries. Instead, identify a solid surety agency that has access to the best bonding markets and will only do a soft pull on your personal credit. What’s more, in the event of a claim, you need a knowledgeable, experienced bond agent who will act as your advocate. For your money, you want an agency that will fight for your interests, maintain the flow of information, and help you get the potential claim resolved with minimal disruption.
4) What to expect in freight broker bond premiums
- Applicants with solid credit should expect to pay annual premiums that range from 1 to 4 percent of the $75,000 bond.
- Applicants with credit scores of 650 or below may see their rates go up to a range of 5 to 15 percent.
- In rare cases of poor credit, the bonding company may charge premiums as high as 20 percent or require collateral in order to issue the bond.
5) Yes, you can still secure a bond with bad credit
Despite what you may think, you’re likely to get a freight broker bond regardless of your credit score – unless you’re currently in open bankruptcy or you’ve been late with a child-support payment. It will just cost more. Some of the factors that will drive up premiums are the presence of tax liens, a past bankruptcy or civil judgments, among others.
6) Take steps to improve your credit
The better your personal credit score and history, the lower the risk surety agencies perceive in bonding your business and the lower your premiums. That’s why it pays to clean up any lingering negative items in your credit history before you start the bond renewal process.
7) Put your best financial foot forward
In addition to your credit history, surety agencies also look at your profitability and years of freight brokerage experience as indicators of financial strength and stability. Even if you’re a relative newbie, if your business is well-operated and making good money, present your financials in the most advantageous way to showcase a low-risk, stable, trustworthy business.
8) Be wise when selecting your surety bond agency
Look for agencies that work with a larger number of surety companies – but only those that are A-rated and T-listed. Why? The more likely they can match you with the best bonding option and provide a low rate that actually provides adequate security if there’s a claim on your bond. Get what you pay for in peace of mind.