These bonds are paid by those individuals who are in the transportation industry as freight forwarders and brokers. These brokers and their businesses are regulated by the (FMCSA) Federal Motor Carrier Safety Administration. This body was established to guarantee payments to shippers and motor carriers whenever the brokers fail to follow or comply with its agreements and regulations. It is the responsibility of FMCSA to revoke those brokers who do not comply with their agreements and regulations.
How do freight broker bonds work?
All the freight forwarders and brokers are required by the FMCSA to obtain these documents as part the licensing process. A freight broker bond is helpful in protecting motor carriers and shippers as well as the contractual obligations that these brokers have towards their clients. This agreement has three parties- surety, oblige and the principal. The surety is the person or side that issues this body.
Cost of freight broker bonds
With this type of bond, forwarders and brokers are allowed to pay a certain percentage of the bond amount. This amount is paid in the form of annual premiums, and it does need any collateral. The cost charged is determined by the following three factors:
- Company’s business experience
- The company’s financial strength
- The personal credit of the business owner
Bad credit program
Individuals having a bad credit score are required to pay a much a higher premium than those who have a good one. This is because of the high risks associated with such applicants. However, this should not discourage you if you are one of them. It is still possible to get a premium at an affordable price. Applying online can help you in knowing the amount of premium that you can pay. The online service is free.
Lowering the cost of your freight broker bond
The cost of a freight broker bond can be lowered over time. This is done by following some of the useful steps that can help in tilting their scales in the applicant’s favour. These tips include:
- Providing strong business or financial statements
- Taking the necessary steps that are helpful in improving your credit score
- Working closely with the right agencies dealing with surety bonds
- Providing cash verification and owning strong liquid assets
In addition to this, working with a reputable bond agency can help you in strengthening your application and reducing the overall bonding costs. He or she is capable of requesting additional documents that can favour you.