What is a Yacht Broker Bond?
Yacht brokers must post a yacht broker bond to become licensed to operate a business in many states. As a surety bond, a yacht broker bond is a safeguard for the public and the state, and it ensures that a licensed broker abides by applicable laws.
If a yacht broker fails to comply with regulations relevant to the industry, a customer can make a claim against a yacht broker bond to cover financial damages.
Who are the Parties Involved in a Yacht Broker Bond?
Like other surety bonds, a yacht broker bond contracts three specific parties.
The obligee is the state licensing authority requiring a bond to be posted.
The principal is the licensed broker responsible for obtaining a bond.
The surety company provides the bond to the principal and extends a form of credit to cover legitimate claims. Yacht broker bond claims, however, must be repaid by the principal.
How Does a Yacht Broker Bond Work?
If a yacht broker commits fraud or disobeys the law in some other way that financially affects their customer, then the customer can file a claim against the yacht broker which ultimately falls on the yacht broker bond.
The surety company holds the bond and pays out any financial damages to the customer if the claim is successful. The yacht broker who is guilty of the mishap must then repay the claim amount to the surety over time.
Who Should Get a Yacht Broker Bond?
Some states require yacht brokers to obtain a yacht broker bond, including Florida, California, and Maryland. You may need to check with your state or local agency to determine the licensing requirements for you. Doing so will ensure you’re properly licensed in your area.
How Do I Get a Yacht Broker Bond?
You can start the process of getting a yacht broker bond by submitting a short online application. Once the details of your business and your personal credit history are reviewed, you receive a quote for your bond premium.
What Does a Yacht Broker Bond Cost?
Yacht broker bonds are required in various amounts depending on the state regulations where the business operates. The bond amount dictates the price of the bond, and it generally falls between $5,000 and $200,000, based on the sales volume and licensing requirements.
Yacht brokers do not pay the full amount of the bond but instead pay a bond premium, which is a percentage of the bond total, ranging between one and 10 percent of the total bond amount.
Can I Get a Yacht Broker Bond with Bad Credit?
The bond premium you pay as a yacht broker is based on your personal credit score and business financials. Yacht brokers with a clean credit history and a high credit score are perceived as a lower risk than those with bad credit history.
In many cases, you can still obtain a yacht broker bond with bad credit, but the bond premium will cost you a higher percentage of the bond total.