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Freight Broker Bond

freight broker bond

What is a Freight Broker Surety Bond (BMC-84)?

According to the Bureau of Transportation Statistics, more than $65 billion worth of motor freight traveled throughout North America between June 2018 and June 2019. Freight is a crucial part of the national economy, and without bonds, it would be incredibly difficult to get things between Point A and Point B.

The Freight Broker Bond (BMC-84) is a license surety bond required by the Federal Motor Carrier Safety Administration (FMCSA). The bond is required of businesses intent on obtaining a property broker license, from the FMCSA. The bond provides a form of protection for motor carriers hired by the licensed broker. The bond protects the payments due to the motor carrier for jobs completed for the broker. The FMCSA Freight Broker surety bond requirement is continuous, meaning that as long as the operating authority is in place, the surety bond requirement remains as well.

Freight Broker Bonds are sometimes referred to as ICC Broker bonds. The Interstate Commerce Commission (ICC) was at one time the agency that administered motor carrier licensing. The ICC was abolished in 1995. Motor carrier licensing administration responsibilities were then transferred to the FMCSA, a division of the Department of Transportation (DOT). These bonds can also be referred to as a BMC-84 bond or BMC-84 surety bond, which simply refers to the form required to register the bond with the FMCSA. Regardless of the term, all these bonds function in the same way.

What does the Freight Broker Bond do?

Freight broker bonds provide a form of recourse for a motor carrier hired by a broker. If a motor carrier has not received payment for a job for which payment is due, a claim can potentially be made on the surety bond. The Surety, the company providing the guarantee behind the bond, if unable to remedy the situation, would be required to make a payment up to the bond penalty amount. The surety would then attempt to collect the paid claim amount from the broker. Ultimately, the broker is responsible for any amount paid out on a claim.

There are three parties involved in all surety bond agreements. The principal is the person responsible for obtaining the bond, typically the broker. The obligee is the person who requires the bond and has the right to file a claim against it, typically the motor carrier. Finally, the surety is the company that issues the bond and guarantees payment of any valid claims, up to the bond total.

What is the purpose of a Freight Broker Surety Bond?

Without the protection of a bond, motor carriers would face a lot more risk when hauling freight. Imagine investing the time and money to carry a shipment across the country, only to learn that the broker refuses to pay. Freight broker surety bonds ensure that the motor carrier who did the work can get the compensation they're entitled to. At the same time, they hold the principal (broker) financially responsible despite the fact that they tried to withhold payment. Bonds eliminate some of the risks associated with hauling freight and incentivize the entire industry to be honest and accountable.

Freight broker bonds create consequences and costs for the bonded brokers, but there are upsides as well. By raising the standards for people who want to become freight brokers, surety bonds keep bad actors out of the industry, which enhances the reputation of all freight brokers. Another advantage is that brokers who have a bond demonstrate their commitment to fair business practices and willingness to hold themselves accountable for any lapses. Haulers are eager to work with honest brokers, and bonds build that trust, helping create a pool of haulers that brokers can depend on to handle shipments.

Who needs a Freight Broker Bond?

Anyone seeking a property broker license from the FMCSA must first prove they have a freight broker bond in the required amount. It's impossible to get a license without a surety bond and illegal to run a freight brokerage without a license. Obtaining a bond should be a top priority for anyone planning to open a business in the freight industry. If you have questions about whether you need a surety bond and what the requirement entails, the team at Viking Bond Service is here to help. Contact us for in-depth advice that we offer at no cost and with no obligation to get a bond. We're here to help.

How Much Does a Freight Broker Bond Cost?

Freight Broker bond rates vary greatly depending on the qualification of the bond applicant(s). The rates are determined based on various factors which include credit standing and may include financial standing as well. The best way to get a truly accurate quote for a Freight Broker Bond is to apply for the bond and let the underwriter review the request and put a quote together. The quote will be based on your credit risk, meaning that applicants with high credit scores will typically pay less. However, applicants with lower scores are not automatically denied, and their premiums are not exorbitant either. High-risk applicants will pay slightly more, but in most cases, they can still get the freight broker bonds they need to operate their business legally.

Viking Bond Service, Inc. will always attempt to get the best rate for any surety bond request. We go above and beyond to help more applicants obtain the bonds they need. Our bad credit surety bond program helps people with bad credit who may have been denied a bond elsewhere get a fair evaluation instead of an outright rejection. It does not guarantee approval. However, it draws on our extensive resources to help applicants get fair bond quotes even with a less-than-stellar credit score or a blemish on their financial record. In instances where the rate is high to start with due to challenged credit, upon renewal, our renewal department can remarket the bond for a lower rate if there has been an improvement in credit and/or financial standing.

What are the Freight Broker Surety Bond Requirements?

With there being a standard bond amount and an electronic method of filing the bond, there are no special requirements needed to apply for the freight broker bond and get a quote in most cases. The MC number, the operating authority applied for with the FMCSA, will need to be provided prior to issuance of the bond but is not always needed upfront to apply and get a quote.

The bond application requires basic information about the applicant's personal and business finances. With the information provided, underwriters will evaluate how likely the applicant is to pay the surety company back for any claims it compensates. An established, nationwide surety company like Viking Bond Service has the resources to complete underwriting in just 1-2 days, meaning applicants get a quote quickly and can secure the bond they need faster.

The principal is also required to keep the bond active, which means paying a renewal fee on an annual basis. During the renewal process, underwriters will re-evaluate the applicant's credit and quote a revised bond price. The bond renews once the new premium is paid. There is no way to avoid the bond requirement without ending the relationship with the motor carrier, so annual bond renewal is required for as long as the relationship continues.

How to Get Freight Broker Bond Request Started:

  1. Contact us to go over your bond request. Our agents will be able to tell you exactly what may be required to get a good quote for your specific freight broker bond request.
  2. Complete an application and send any required documentation. A financial statement is not always needed but may be required along with the application. An agent will let you know if a financial statement will benefit the quote.
  3. Once the application is received, an agent will work to get the best quote for the request. Typically the quote will be obtained the same day up to 24 hours.
  4. Once the quotes are received, the most favorable quote will be relayed. All Viking Bond Service, Inc. quotes are FREE with No Obligation.
  5. The last step is to simply pay the premium, provide the MC number, if not already supplied, and your FMCSA Freight Broker Surety Bond will be put in place.

How to keep a Freight Broker Bond in good standing?

Keeping a freight broker bond in good standing is just as important as obtaining one in the first place. Loss of bond coverage makes the FMCSA license invalid and renders any future business operations illegal. Losing bond coverage could have catastrophic consequences for a business, so it's imperative to keep the bond in good standing. That starts by renewing it annually, well in advance of the expiration date - something a good surety agency will help you stay on top of. Claims for damages filed by haulers who didn't receive payment could also affect the bond standing in a negative way. If there is a claim, paying it immediately, directly to the obligee will prevent the situation from escalating. In cases where the surety must step in to pay, they may decline to continue bonding the principal (the broker) afterward. At that point, the broker would need to find another surety agency to work with, but that only becomes harder with a record for causing claims. Avoiding claims at all costs is always the best policy for keeping a freight broker surety bond in good standing.

Request an FMCSA BMC-84 Bond Quote:

If you require a freight broker surety bond to legally operate your business, don't delay. For more information, please call us at 1-888-278-7389 to speak to one of our bond experts. Or, if you're ready to apply, take just a few minutes to complete our online application. You're also free to fill out the contact form on this page, after which one of our representatives will contact you shortly.

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