Freight brokers are an important force in the American economy, helping connect shippers of products with carriers to make sure that deliveries are made, keeping the world going round and round. After all, more than 11 billion tons of goods traveled by truck in 2018 according to the American Trucking Association. Without the work of dedicated freight brokers, the complex logistics that get these goods across the country would break down, leaving us without the products we all rely on. In order to become a freight broker and join this group of crucial service businesses, you need to obtain a freight broker bond.
When and why do I need a freight broker bond?
Every state requires freight brokers to get a license. Before getting a license as a freight broker, you need to obtain a freight broker surety bond, or place a collateral of $75,000 into a trust fund. Once you have the bond, provide proof to the state, and meet the other licensure requirements, you’re legally allowed to work as a freight broker. As long as you continue that work, you need to maintain your surety bond, which means you need to renew it on an annual basis and remain in good standing with the surety company that issues the bond. The purpose of the surety bond is to provide a guarantee that freight brokers will uphold the ethical standards and pay the carriers that they hire.
Who does a freight broker bond protect?
The surety bond protects motor carriers whom the broker hires to transport goods. The bond ensures that the broker honors their contracts with carriers and pays them for their work. In the event that a broker does not pay a carrier for work performed, the carrier can file a claim against the bond to receive the monies that the broker owes to them. The surety will review the case and if it is valid they will pay out the value of the claim (up to the bond amount) to the carrier. Then the broker would be responsible for reimbursing the surety for the cost of the claim.
Even though the motor carrier is the financial beneficiary of the freight broker bond, the freight broker also benefits from participating in a bond agreement. Brokers succeed or fail based on their ability to connect motor carriers with shippers. Motor carriers are a lot more willing to work with brokers who take out a freight broker bond because it guarantees they will be paid. That means having a bond makes it easier to connect with more motor carriers, which also makes it possible to broker more details. Bonds may be a cost, but one that ultimately benefits the bottom line.
How much does a freight broker bond cost?
Freight broker bonds are legally required to be written for $75,000. The premium for the bond (meaning the amount that you would pay) is generally between 2% to 4% each year, which is based on a number of factors, including creditworthiness and financial standing. Some clients with good credit can get a freight broker bond for less than $1,000. However, if you have bad credit, don’t worry about being denied for a bond. Quality surety companies like Viking Bond Service do everything possible to approve everyone for a bond even if they have a low credit score or a bankruptcy on their record. People often wonder how to get a freight broker bond and then a license when their credit is less than perfect. The answer is to work with the right surety company and prepare to pay a slightly higher premium. As long as you can cover the cost, credit is not a disqualifying factor in most cases.
What do I need to get a freight broker bond?
The process for getting a freight broker bond is simple and straightforward because there is a standard bonding amount and standard forms. Generally, you can get a quote within 24 hours of submitting your request. As part of that request, you will need to submit an application that asks some basic questions about your personal and professional finances. That information is sent to underwriters who evaluate your credit risk and calculate your premium price. Once that premium is paid, the bond is active and you’re one step closer to earning or renewing your mandatory freight broker license.
How to get a freight broker bond?
The best advice is to partner with the right surety company from the start. The team at Viking Bond Service is authorized to issue freight broker bonds across the country. We make it as easy as possible to get a bond because we have a streamlined application process, underwriters who produce quotes quickly, and a team of bond experts who are here to answer all your questions. It’s easier than you expect and probably less expensive too, so long as you work with a top nationwide surety company like Viking Bond Service.
If you need a freight broker bond sooner rather than later, there are three ways to get the process started. Feel free to call us at 1-888-278-7389 to speak with an expert and get in-depth information. You can also fill out a contact form and one of our representatives will get back to you quickly. Finally, you can complete an online freight broker bond application at any time and expect to get a premium quote in about 24 hours. The choice is yours. If you would like more information before you act, please explore a free online resource we have created all about surety bonds.