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The Surety Bond Blog

10
Sep
2013

Pitfalls of Funding BMC-85 Trusts Using Letters of Credit

BMC-85 trusts can be a nice stable solution for freight brokers that are financially strong enough to be capable of parting with $75,000.  Putting up that kind of money is not an option for most.  Now that the “group bond” has been officially listed as unacceptable by the FMCSA, freight brokers are left with two options: purchase a BMC-84 surety bond  or fund a BMC-85 trust.
75k-guide

Funding Trusts With Letters of Credit Affects Your Credit!

Borrowing $75,000 from a bank greatly impacts your ability to borrow money in the future.  So what happens in event a new vehicle is needed or there is an emergency need for cash flow for your business.  You’ll effectively have $75,000 less to borrow than you would otherwise.  That is significant and could mean the difference between riding out a storm or closing the doors of your business some day.

Surety Bonds Do Not Affect Credit

Surety bonds are designed to not affect the credit of businesses or the personal credit of it’s owners.  Going with a bond rather than a $75,000 trust/line of credit frees up a large amount of credit!  Personal credit reports are reviewed for underwriting purposes, but even then, the credit reports pulled are what is known as a “soft credit pull”.  These soft pulls allow insurance companies to view your pay history without counting as inquiries that lower your score.
Therefore, bonds do not utilize credit you could use in an emergency and the underwriting process has no impact on personal credit when soft credit pulls are utilized.

Get A Bond Quote In Minutes

JW Surety Bonds has an exclusive bond program for the $75,000 freight broker bond available now:

• A+ rated, Treasury-listed surety
• No collateral
• Lowest rates in the country
• Approvals regardless of credit strength
• 99.9% approval rate

 

 

Be prepared for the October 1 deadline. Apply directly on our website to get an instant approval.

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Eric is the Webmaster of JW Surety Bonds. With years of experience in the surety industry, he is also a contributing author to the surety bond blog.

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Comments (1)

Category: Commercial Bonds, Freight Broker Bonds, Misc. Commerical Bonds

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One Response

  1. This is somewhat misleading, most banks today will not issue a letter of credit based on your LINE of credit. Most banks command you have the $ in a CD at the bank, and the bank in turn would issue a letter of credit using the CD as collateral.
    If the bank does in fact, issue a letter of credit agianst your line of credit, this means you just have that much less credit available. If the LOC is drawn upon, then it would become a loan.
    Fees to issue a letter of credit charged by the bank usually run 2-3% of the amount.

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