For anyone already in the freight broker business, a BMC-84 – otherwise known as a freight broker bond – will be familiar to you. However, for those just starting out in the industry, the process of getting bonded can sometimes be a little confusing, and the benefits of the BMC-84 a little hazy. In fact, even if you have been in operation for a number of years, you may have forgotten the true importance of you freight broker bond.
The bottom line is, however, that aside from the legal requirements for freight brokers to ensure adequate coverage, there are several other benefits for your business. Here, we take a look at what your trucking company needs to know about the BMC-84 and why the benefits are important to your success.
Hold on to Your Capital
Perhaps the first thing that springs to mind for both new and established businesses is how any expense can affect your success. Well, while you will need to pay a premium for your freight broker bond, it is only a fraction of the $75,000 bond amount required by law. Additionally, the longer you are in operation without a claim being made against you, the lower your premium is likely to be.
While shrinking premiums are always a bonus, a freight broker surety bond has another benefit. US law states that businesses can choose between a freight broker bond and a freight broker trust fund (BMC-85). The major difference, in this case, is that the trust fund option requires you to post the full $75,000 upfront, eating away at your capital which could be better used elsewhere.
Enjoy Increased Protection
Unlike a freight broker trust fund (BMC-85), a freight broker surety bond (BMC-84) offers an added layer of security for your business in a variety of ways. First, while surety bond providers are required to be licensed by the FMCSA, trust companies are not. In a worst-case scenario, this could mean a trust fund company becomes insolvent and you lose all of your money, whereas surety bond providers are fully protected against insolvency.
In addition to this, surety bond agencies and companies share an interest in helping resolve claims, meaning that any claims made against your bond will be thoroughly investigated before any compensation is paid out. This stands in contrast to the BMC-85, where trust companies may pay out claims with zero or little investigation since it’s your cash that is paying the claim.
Foster Increased Trust
One of the core reasons that freight broker bonds were introduced was to increase trust between freight brokers and those who use their services. They are, in essence, a legally binding contract between your business (principal), the obligee (the FMCSA), and the surety (the bond provider). This three-way agreement ensures that freight broker companies operate within legal guidelines to provide trustworthy services.
In addition to this, non-US-based companies who operate in the US, say from Canada or Mexico, will also need to be bonded in order to continue working in the country. However, for new companies with trans-border plans, proving that you are bonded before you begin negotiations will increase trust levels with anyone you plan to do business with in the future.
Rely on Fair Competition
Finally, freight surety bonds ensure fair competition across the whole industry through proper regulation of all operators. This means your company cannot be undercut by others operating outside of the law. However, freight companies are usually rewarded for continued operation within the regulations, and if no successful claims are made against your company, the more successful you will be.
Put simply, the longer you provide high-quality services to your customers and clients, the lower your surety bond premium is likely to be. This means that, while all freight broker companies must operate to a certain standard as dictated by the US government, those who do it best can push ahead of the crowd by reducing the expenses associated with this inescapable legal requirement.
For both existing and new businesses, it is clear that a freight broker bond has a variety of benefits—not only over the freight broker trust fund, but also within the context of your company’s sustainable operation. However, it is also important that you research and choose the best quality freight surety bond provider to ensure your coverage matches your business’ objectives for the future.
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