Freight brokers play vital role between the shippers and carriers. They act as middle man by finding good transportation companies and negotiating with them for good rates for shipping and fast delivery of goods. At the same time, they connect these companies with the businesses that require using the services of transportation of items. To become a freight broker in US, you need to get training, gain experience of the industry and get Freight Broker Surety Bonds.
Need for surety bonds
The Federal Motor Carrier Safety Administration or the FMCSA requires the freight brokers to get a broker surety bond during the process of getting the freight brokerage license. The Freight Broker Surety Bonds are actually means to protect carriers and shippers and contractual obligations that the freight brokers have for them. The surety bond is thus an agreement having three participant sides including the principal, the oblige and the surety. The surety side guarantees the oblige with the issue of the bond that they will be protected from any harm which may come up if the principal does any fraud or engages in unlawful work. So, if the freight broker delays or refuses payment, the freight broker bond goes to effect and as a result the shippers and carriers get compensation.
The cost of freight broker bond is determined after looking at the three important points. They are:
- Experience of the business
- Personal credit of the business owner
- Financial strength of the business
The BMC-84 or Freight Broker Surety Bond allows the forwarder and freight brokers to pay a percentage of total amounts of the bond in form of premium without any collateral. If the credit score of the freight broker is bad, the bond cost will be high because of the risks involved. It is possible to lower the broker bond cost by providing strong financial statements and taking few steps to improve the credit score.