Surety Bond Blog

Freight brokers play an important role in delivering thousands of varieties of goods to people all over the country. There is a lot of financial risk within the freight business so there are safeguards in place to make sure everyone plays fairly. The main issue is that many freight brokers run into the expenses of these required government safeguards in order for a broker to operate a legal business.

When a freight broker wants to open up a trucking/brokerage business, they must first register with the Federal Motor Carrier Association (FMCSA) . The FMCSA requires an aspiring freight broker to obtain a safeguard to guarantee the payment of freight carrier charges to the truckers hauling the goods and the goods themselves of which there are two options; the BMC-84 (a $10,000 surety bond) and the BMC-85 (a trust fund). The freight broker must obtain one of these in order to legally register their business.

Both of the options satisfy the FMCSA requirements but there are pros and cons to both, so let’s start with the BMC-84 (surety bond). The BMC-84 bond option is a $10,000 surety bond where freight brokers must pay a yearly premium which is based off of the creditworthiness of the company owners. Since the surety company who writes the bonds is financially backing the bonds and the companies who obtain them, they want to make sure the applicant takes care of their financial responsibilities; the surety uses the owner’s personal credit as a gauge of how they do that. At times some collateral is also required along with the yearly premium. Other factors are looked at such as experience, a personal financial statement, and the number of years in business. All of the research the surety does will help them determine the premium for the bond and ultimately, if the applicant can be approved for the BMC-84 Bond.

Should a claim go out on the bond as a result of a freight broker not following the rules, the surety will investigate whether the claim is legitimate before they demand reimbursement from the freight broker. This can be a more difficult bond to get because of the frequency of claims. Luckily for troubled freight brokers, there are special markets out there that are able to help those who previously had trouble obtaining the bonds stemming from credit issues.

The second of the two options is called the BMC-85, which is a Trust Fund. As opposed to the BMC-84 surety bond where brokers pay a yearly premium, the BMC-85 trust fund requires the freight broker to post the full $10,000 cash as collateral. This means the $10,000 will be frozen for as long as the Trust Fund is in place. The downside of posting that much collateral is it becomes tied up working capital that could have potentially been used to expand or improve their business. There are also fee’s associated with the trust fund which must be paid in addition to the collateral. If a claim goes out with the Trust Fund in place, the investigative claim process is not always thorough so the Trust holder may be more trigger happy to pay the potential “false “claim using the Trust Fund before finding out if the claim is actually genuine. In short, the brokerage company takes all the risk, and pays for it to boot. Although there are more negative’s with the BMC-85, it comes in handy for brokers who are unable to obtain the BMC-84 bond.

Below is a table showing the advantages and disadvantages of both the BMC-84 and BMC-85:

UPDATE: JW Surety Bonds is now able to approve BMC-84 freight broker surety bonds with ease! Good or bad credit…no collateral required. Apply online now!

The surety bond option is good for brokers because of the low or no collateral. The trust fund is the way to go if a broker can’t acquire the bond at all. Luckily if you’re a broker looking to get a freight broker bond (BMC-84) JW Surety Bonds can help you whether you have mediocre, poor or no credit at all; more importantly we now have an exclusive market with access to freight broker bonds with no collateral required! The market we recently acquired eliminates the main downfall of the freight broker bond for brokers weighing the options when registering their business. So don’t waste another minute, apply for a freight broker bond using our quick online application and a knowledgeable agent will help you get on the road to running a legal freight broker business.