Editor’s Note: The Eld mandate has arrived but the changes to the industry are still up in the air. Vic Lance of shows us what the industry expects to see regarding ELD adoption.
Electronic Logging Devices (ELDs) were introduced by the Federal Motor Carrier Safety Administration in 2017. The purpose of the move is to ensure accurate recording of hours of service for drivers with a safer work environment in mind.
, but there is a transitional period. Until December 18, 2019 drivers and fleet owners can still use AOBRDs (Automatic On Board Recording Devices) installed prior to the ELD rule. After this date, they have make sure they meet the new requirements for self-certified ELDs registered with the FMCSA. Additionally, as of April 1, 2018, drivers will be penalized if found working without an ELD.
The new devices . By making this an automatic process, the FMCSA wants to reduce accidents on the road due to fatigue, as well as manipulation of logged hours and similar practices.
The opinions about ELD adoption in the freight community are heavily divided. For many truckers and fleet owners, this decreases flexibility and efficiency, potentially bringing down volume of work and income. Others see it as a useful measure that promotes safety.
Besides carriers, ELD adoption will also affect freight brokers in a number of ways. Here is what the industry expects.
In essence, the limitation on hours of service for carriers stays the same. The only thing that is changing is how the time is recorded and monitored. Paper logging previously allowed flexibility for drivers and fleet owners, as they could redistribute hours to match federal requirements and still meet pick up and delivery deadlines. This option is now removed, as logging happens automatically and cannot be altered.
As a result, experts say there will likely be a reduction in the actual hours driven. Some carriers may also not be able, or willing, to comply with the ELD mandate. This is . For brokers, it means restricted access to transportation services at a time when demand from drivers is growing. While the pressure in the industry grows, it may be also a good opportunity to strengthen relationships with carriers and shippers and improve the communication style based on loyalty and trust.
With better adaption of your strategies, you may still be able to handle the workload. Most of all, as a broker you will have to better manage your customers’ expectations. This will require additional negotiation with shippers to allow flexible pickup and delivery times. It may also involve finding overnight parking options for drivers who now cannot complete load transportation within a day.
Together with the growing demand for drivers, the role of the broker is also likely to be emphasized. The need for brokering services is expected to grow, as handling the communication and coordination between shippers and carriers can get more complicated as a result of the ELD mandate. The number of licensed and may thus increase as well.
As carriers’ capacity shrinks, . If you work now on developing strong partnerships with trusted truckers and fleet owners, you may end up on the winning side. In a tense demand market, shippers will value brokers who can ensure a load gets picked up and delivered on time. They will also choose to work with brokers who have access to ELD-compliant carriers.
In order to guarantee smooth delivery, brokers may have to seek . On one hand, some shippers may demand written proof for that prior to conducting business with you. This is a safety measure for them, as they want to be sure their loads will not get delayed because of ELD violations.
What’s more, though, is that it’s . A good option is to improve the language of your agreements with carriers by including precise statements. You can, for example, include a clause that a carrier will use ELD-compliant vehicles to transport the agreed loads. Besides legal measures, you can also assist your partners with the choice of ELDs and their adoption.
What are your thoughts about ELD adoption and how do you see it affecting freight brokers? Please share in the comments.
As the freight industry keeps growing, more than ever before, carriers and brokers are needed to keep things rolling. To satisfy market demand and make use of the big opportunities the industry offers, freight broker numbers have also risen steadily over the last few years.
But being a freight broker is not only about mediating the transportation of freight, it also requires knowledge of all legal requirements – from the licensing process, to obtaining and renewing your freight broker bond, and securing your ongoing compliance with laws and regulations.
provides guidance in all of these areas and more. It is a comprehensive resource relevant both for people with no experience who are starting, or contemplating to start a freight brokerage. It is also meant for those who already have some experience and want to brush up their knowledge on the subject of legal requirements and regulations.
One of the big hurdles in opening up a brokerage is that of getting all the facts straight as to what, when and how you must do. From completing the necessary qualification requirements and applying for a license with the Federal Motor Carrier Safety Administration (FMCSA), to planning all the necessary resources – opening and maintaining a brokerage may seem like quite a challenge.
In reality, things are easier than they seem but getting to the heart of the matter often becomes a hurdle in itself. That’s why we’ve put together this guide to help aspiring freight brokers get all the relevant information on how to start their brokerage. The e-book includes information on:
But that’s not all! For those who have already covered all of the above, this e-book also offers advice on how to remain compliant once you have become licensed as a freight broker. This includes directions on:
Moreover, licensed brokers may also benefit from the sections offering advice on training and networking with fellow brokers. After all, networking constitutes a great deal of learning about the industry and the various compliance requirements.
Finally, to make things even easier for you, we’ve included numerous additional tips throughout the whole book. These provide important factual details at every stage of your journey as a broker that can save you time and money!
Grab your free copy of the Complete Compliance Guide for Freight Brokers from the download link below and get all the information you need!
After a number of delays, the Federal Motor Carrier Safety Administration (FMCSA) has suspended the implementation of its Unified Registration System. The system was supposed to be fully rolled out on January 14, 2017.
The is a plan to streamline the process of license renewals and changes for transportation professionals. The FMCSA also aims to better control the database of licensees through this innovation.
Here is an overview of the URS history and what’s planned for it ahead.
The idea of the URS is to simplify and bring into one place all licensing and reporting done by the FMCSA. The end result should be a single, smart ‘online form’ that gives an easier access to data and a higher level of transparency.
The first phase of the URS was started in December 2015. It affected new carriers registering with the FMCSA. Instead of going through the regular procedure, they have to undergo the new URS method for moving through the licensing process and submitting . About 100,000 new registrations have been made via the URS.
All licensees had to move to the new system by September 30, 2016.
In July 2016, however, the FMCSA decided to move the full implementation deadline to January 14, 2017. This meant that by April 14, 2017, all licensing done by the Administration had to be through the URS.
The January date for complete roll-out has been suspended for an indefinite period of time. While the FMCSA continues to stand behind the project, technical delays have prevented the full rolling of the system.
The licensing authority now plans to first fill a complete central database by migrating all existing data. It aims to verify the compatibility of the system with individual states before implementing it for all licensees and provide needed education and information for all relevant bodies. The URS will go into full power once the technology is complete, so that the transition is smoother.
Besides the actual new registering of carriers, the Administration has conducted a number of additional procedures. They include , as well as checking all applications for previously disqualified carriers who want to get into business again. The FMCSA stated that even though the new system is not in full force, it has .
With the final stage of the URS, all brokers and carriers were supposed to move to the new system. However, as this full implementation is now suspended, professionals who have an existing registration with the FMCSA will continue using the old method.
This means that all reporting and registrations will continue to be done via the current FMCSA procedure. Existing licensees can still display their current authority numbers rather than an URS number.
It’s a good idea for freight brokers and carriers to stay on top of FMCSA decisions regarding the implementation of the URS in order to make sure they don’t miss important updates. While the process has not been exactly smooth, the transition to the new single system aims to ease the licensing of transportation professionals and ensure visibility and high standards in the field.
How do you see the URS working out for the logistics industry? Please share your thoughts in the comments below.
The Department of Defense’s Surface Deployment and Distribution Command (SDDC) has announced an . This is a chance for transportation professionals who would like to move military freight to kickstart their working relationship with the SDDC. The period during which you can take advantage of the opportunity runs from January 9 to February 28, 2017.
Let’s look at the SDDC requirements for military freight carriers, and why this open season is something you can take advantage of.
Freight carriers who want to transport military cargo have two main options. They can use an SDDC-approved broker as the middleman between the DoD and their business. Then they need to get listed on a broker’s carrier list.
For carriers who would like to work directly with the SDDC, the open season is thus a convenient way to start this working relationship.
Carriers who are new in the industry and have less than three years of experience will not be considered during this application session. Since the are quite elaborate, it’s best to apply only if you are sure you can meet them all.
The conditions of SDCC’s open season option
The open season is an excellent opportunity to start working with the SDCC and enter military freight transportation. However, not all freight carriers can apply.
If you comply with the rules set forth by the SDCC, you can get in touch with the Military Surface Deployment and Distribution Command via email at [email protected] or via mail:
1 Soldier Way
If you’re planning to apply for a DoD authority for the first time, it’s a good idea to get acquainted with the . Here is an overview of the steps:
All carriers have to first apply for a Standard Carrier Alpha Code (SCAC) from the National Motor Freight Traffic Association. Your SCAC starts with the first letter of your company and is a two-to-four-letter code unique to your business. This is your identification code for working with the DoD.
You also need to open an electronic account with the to receive online payments for the work you do for the SDDC. You need to get PowerTrack, or , certification as well. Only when you have your SCAC and Syncada at hand you can apply online with the SDDC.
Freight carriers who have been approved by the SDDC need to as well. It serves as an extra layer of protection for the SDDC against carrier’s default and non-delivery of military freight.
If you are planning to transport in one state only, the bond you have to post is $25,000. The amount is $50,000 for working in up to five states. If you want to transport across the U.S., you have to obtain a $100,000 bond.
In case you have registered as a small freight carrier with the program, you can benefit from lower bond requirements. You will need to post a $25,000 bond for operating in up to three states, $50,000 for up to ten states, and $100,000 for more than eleven states.
Got any more questions about SDDC’s open season? Feel free to leave us a comment!
Vic Lance is the founder and president of . He is a surety bond expert who helps freight brokers get licensed and bonded. Vic graduated from Villanova University with a degree in Business Administration and holds a Masters in Business Administration (MBA) from the University of Michigan’s Ross School of Business.
Editor’s Note: This is a guest blog from our friend Vic Lance. Vic is the founder and president of Lance Surety Bond Associates. In this post, Vic discusses the roundtable that the FMCSA plans on having later this month to discuss the BMC-85 trust fund and what it means to freight brokers.
The Federal Motor Carrier Safety Administration is organizing a to discuss BMC-85 trust funds, used by freight brokers and forwarders. It seeks feedback on these practices due to some recent complaints. The biggest issue with trust funds, as it appears now, relates to the procedures in case of brokers’ financial failures. The BMC-85 trust fund is one of the options for freight brokers and forwarders to meet the $75,000 financial guarantee requirement set by the FMCSA during the licensing process. The other way to comply with the rule and obtain their operating authority is , namely, a freight broker surety bond.
The FMCSA is collecting information from shippers and motor carriers about any difficulties they have met when making claims against freight brokers and forwarders. The point is to understand whether the interests of the parties that need to be protected by the BMC-85 trust fund are, in fact, actually safeguarded.
This initiative comes after many complaints related to BMC-85 trust fund providers have been filed with the FMCSA. The Administration also had to provide help to claimants who wanted to launch a procedure against brokers and forwarders with financial problems.
Due to these occurrences, the FMCSA wants to ensure that the financial instruments are working well and that freight brokers are solvent so that they can cover their financial obligations to fleets and owner-operators.
To address these pressing issues, the FMCSA is seeking feedback on a few core issues. It is collecting information if any BMC-85 trust fund operators have consistently failed to consider claims made by shippers and motor carriers.
The second point of concern is the type of assets that BMC-85 trust funds require to hold. The FMCSA is also looking to understand what is considered as the best composition of assets for these funds – solely cash or a combination with other liquid financial instruments.
A few questions are concentrating on the regulation of BMC-85 trust funds as well. The FMCSA wants to understand whether other authorities regulate trust fund filers and whether freight brokers and forwarders should be required to showcase the solvency of the trust funds they choose.
Last but not least, the FMCSA would like to get input from all interested parties what actions it can take to make the claims process smoother and to tackle issues with trust funds solvency. The goal is to ensure that shippers and carriers who are making legitimate claims against a trust fund can collect their legal reimbursement with ease.
The Administration underlined that the talks will not focus on any increases to the financial responsibility limits, currently set at $75,000 since 2013. Thus, brokers and forwarders should not worry about their requirements, but there might be changes for the financial institutions providing the trust funds.
The roundtable will take place on Friday. May 20 from 9:30 am to 4:30 pm. The session is open to the general public and will be held at the Media Center of the U.S. Department of Transportation in Washington, D.C.
In 2013, the FMCSA introduced a higher requirement for the financial guarantee that freight brokers have to provide as a part of their licensing process. Earlier, the amount was $10,000, which was then increased to $75,000 in the form of .
The main difference between the two options relates to the initial investment that brokers and forwarders have to make to satisfy the FMCSA requirement. In the case of BMC-85 trust funds, the whole amount needs to be provided upfront and should stay in the fund for the duration of the license. As for BMC-84 surety bonds, brokers need to pay only a few percentages of the sum and renew their bonds annually. Their surety then guarantees that they can provide compensation up to $75,000 if a claim against them gets proven.
The purpose of both the BMC-84 and BMC-85 is to protect shippers and carriers from fraudulent activities or financial failures by freight brokers and forwarders.
Individuals who are interested in sharing their opinion on the topic but would not be able to attend the roundtable physically can .
What is your experience with BMC-85 trust funds? Do you see a reason for the FMCSA to introduce changes for it? Please share your thoughts in the comments below.
It’s a great time to be in the freight brokering business, and there are plenty of reasons to consider starting your own brokerage now.
With an improving economy across the U.S., an increasingly stable and , and increasing demand for new brokers, you have all the external conditions to become a .
We’ve compiled this comprehensive guide and an infographic that will take you through the main steps of launching your business. You can read our step-by-step guide below or .
Before you take the first steps to launching your freight brokerage, it’s a good idea to review the role of the broker in the industry.
Besides earning well – freight brokers can make up to $90,000 per year – they’re also indispensable for the transportation of goods and cargo. Essentially, freight brokers keep the economy running.
Freight brokers are filling in a crucial role in the movement of freight, as the missing link between shippers and carriers. They negotiate good shipping rates and fast deliveries from transportation companies, and connect them with the businesses that need to transport goods or cargo, so carriers can maximize their loads.
Besides acting as an intermediary, brokers have an important function in the tracking of freight, as they keep thorough records of pickups and deliveries, and other information. They also oversee the legal part of the transportation, as they need to be experts in shipping regulations and procedures.
Brokers are the ones who make sure that each step of the transportation process occurs, so that the freight arrives safely to its final destination. To become a freight broker for trucking and transportation means to take responsibility for a vital part of the shipping process.
Starting your freight brokering journey does not need to be complicated – but you do need to prepare thoroughly for.
So what does it take to become the much-needed middleman in the transportation industry?
While brokering freight does require knowledge and experience in the field, there is nothing you cannot gain with practice and diligence. In other words, a strong will is among the most important qualities you need to have in order to make it.
In terms of skills, it’s a good idea to refresh your math skills because you’ll need to make use of them on a daily basis. Turning on your business know-how is important too, because you need careful analysis and critical thinking to make the best of existing opportunities.
Your communication and people skills, naturally, are of critical importance, as a large part of your work will be done over the phone or email – both negotiating and closing deals. If you have – or can build up – some experience in the transportation industry in another role, this can be very beneficial for your brokering, as you’ll be better connected with the main players in the field.
Besides the general skills you need to refresh or develop, you might want to attend a freight broker school in order to get fully prepared for actual requirements of the brokering job. Getting the is also important, so you can always refer to them when you’re unsure how to go ahead.
The best option for freight broker agent training is to attend freight broker classes. There are numerous solid freight broker training experts – Dennis Brown from , and Scott Woods from the, just to mention a few.
Investing in transportation broker training with an expert can give you deep insight into the workings of the industry and its main players. You’ll also pick up practical knowledge about the work of a freight broker, and learn how to work with shippers, and how to handle shipping rates negotiations. Let’s not forget that training can lead you to open freight broker jobs too, and potentially open many doors for your business.
We asked David from how much time one would have to set aside to pass a freight broker course as well as some hands-on training. David told us that in order to go through the “Broker Operations Manual”, which includes all the relevant theoretical info and data, one should plan on setting aside about three weeks. And then you should also plan on at least one more week of hands-on training at a brokerage where you will develop some initial skills.
In order to legally operate a brokerage, you will also have to choose a company name and register your business. You can check whether the name you’ve chosen is taken at the US Patent and Trademark Office. Part of registering is also carefully selecting the kind of entity you’d like to register as – sole proprietor, partnership, limited liability company or corporation – and then registering your business in your state at your local business license department.
On a more practical note, preparing a solid business plan is very important. With it, you will be able to apply for a line of credit with your bank but even more than that, your business plan is also an exercise in specifying which niche you will be targeting and who your customers are.
Your business plan includes a go-to-strategy and the more you invest in figuring out the specifics and researching the market, the better you will be prepared to meet its challenges.
A freight broker without carriers is like a ship without sails. Part of your go-to-market strategy should also include finding the carriers which work in the field of operations you’ve chosen for yourself. What’s more, the right carriers are also the ones that are trusted, reliable and professional. This makes the task hard but not impossible!
From online directories and direct references by other brokers to networking events, there is a multitude of ways to find the right carriers for yourself, so don’t hesitate to try out a number of them and don’t just go with what feels easiest!
After you’ve gotten acquainted with the important role of the freight broker, and what you need to get started in terms of education and a business plan, it’s time to delve into the legal side of how to become a freight broker.
Before you start operating in the field, you need to get a freight broker license from the (FMCSA). The licensing is also referred to as obtaining your Motor Carrier Operating Authority (MC authority).
Your first step in getting licensed is to get a USDOT number, which is required on the application form. Then you can start the . Along with filling in the freight broker application form, OP-1, you have to also pay the one-time application fee of $300. You can find further . The processing time is between four and six weeks.
Once your application has been approved, the FMCSA will send you your MC number by mail.
The MC number, however, does not mean you can start business yet. When it’s issued, it gets posted on the Register page of the FMCSA. Within 10 days, anybody who finds a problem with your registration can protest against it. After this period, you are granted the MC authority.
As just mentioned in the previous section, to get your MC authority from the FMCSA, you need to obtain a , or a BMC-84 bond. If you’ve been following the freight news, you’re probably aware that back in 2013, the bond requirement was raised to $75,000 to ensure high industry standards and accountability.
If you’ve never worked with surety bonds before, it’s important to understand what they are: in essence, a three-party contract. Your freight brokerage is the principal, the FMCSA is the obligee, and the surety is the one providing the bond.
The purpose of the freight broker bond is to guarantee that you will follow all applicable rules and regulations in your brokering. In this sense, the bond is an additional line of credit for your business. Because of the risk involved in providing you with this, when you apply for a bond, the surety needs to take a close and hard look at your personal and business finances, as well as your credit score and the overall stability of your business.
On the basis of this evaluation, the surety decides your bond premium, or your actual your . That’s right: you don’t need to pay the whole bonding amount, but only a percentage of it.
If your credit score is above 700, you’re likely to pay between 1.25% to 3% premium, or between $937 and $2250. For applicants with credit score between 650 and 699, the percentages are between 3.5% and 5%, or $2,625 and $3,750. Even if your credit is far from perfect, you can still get bonded with a bad credit program, though you’ll have to pay slightly a higher premium to mitigate the risk involved.
In general, the best tip to reduce the price you have to pay for your freight broker bond is to work on improving your credit score. You can find more smart tips on reducing your costs when renewing your bond yearly .
With your MC number you can go ahead with getting insurance (Form BMC-34 for loss and damage and in some cases, Form BMC-91 or BMC-91X for bodily injury, property damage and environmental restoration) and your surety bond, which we detailed in the previous section.
You need these insurances because many, if not most, shipping companies will request that you present these before you begin work together.
At this stage, once you’ve obtained your bond and insurance, you’re ready to choose your process agents for each state you do business in. This can be done through (Designation of Agents for Service of Process) which you need to fill in and submit to the FMCSA.
When it comes to the material assets you need to start a brokerage, there are a few things to consider – even if you don’t plan to open a physical office in the beginning.
The essential technical gear that you need at first includes a computer, a printer, a copy and fax machine, a landline phone and a mobile one, some office supplies – and a solid internet connection. You might also want to look into freight brokering software, as it can automate a part of your work and boost your productivity. With time, you’ll see what other items or services are necessary and get them as the need arises, but these are the basics.
Unless you have enough cash already at your disposal, you will probably have to consider the line of credit you can secure before you start brokering. Since you will be the intermediary between shippers and carriers, you’ll often have to pay truckers for the shipment before you’ve received the payment from the shipper.
Once you’ve settled your business plan and gotten a line of credit, you’re on the safe side financially, and you’ll be able to start brokering for success.
The final bit you need to cover is how you will market your brokerage to potential clients. Here you can think about what will make you stand out and how you can get your message across best.
From a marketing strategy and social media profiles with regular posts to a great website with a blog and printed marketing materials – the scope depends on what you think will impress future clients most.
Getting well acquainted with what freight brokers do, how to become a freight broker, and how to start your brokering business is the first step in starting your successful business. Check out our infographic below for a visual representation of the various requirements for freight brokers and what else you need to do or know when becoming a broker!
Editor’s Note: This is a blog post about the state of the freight brokering business in 2015. Thomasholmes is a freight broker and holds a $250,000 TIA Broker Bond. We bring this information to the community so that both shippers and those in the industry understand the state of the industry. Many shippers have been burned by freight brokers who work on behalf of the shipper for transportation procurement, accounting services, freight claims management, and more. This is because there is not a lot of education on how a freight broker must adhere to certain standards and what shippers need to look out for. If you are a shipper, this post will bring light to you on how the freight brokering business works. IF you are a freight broker, this post will give you great insight. We hope you find it educational.
CORRECTION (we received the following suggested edit from the in response to this article, which we wanted to share with the public here): You may remember back in 2013 when the price of the freight broker bond (BMC-84) was suddenly increased by 750%, and around 35 percent of freight brokers were driven out of business. At that time, according to FMCSA records, there were 21,565 brokers in the census. Although there is an appearance of an increase in the freight brokerage population over the past two years, there is reason to believe that many of the new broker entrants are actually motor carriers who were reminded by MAP-21 that they should not be brokering freight without a separate broker license (notwithstanding bona fide interlining when carriers take possession of the freight at some point in the shipment), rather than your traditional mom and pop small broker entrepreneurs.
For a majority of the freight brokering business, the deadline for this year’s freight broker bond renewal has passed. As we approach the end of the year, it’s a good time to turn back and see how the industry did in 2015.
Whether you’re a shipper, a current broker looking to revise your strategies, or an aspiring broker who might be hesitating to join this niche profession, a recap of the last year is in order. We’ve prepared this analysis, which examines not just the year in freight brokerage, but also the trucking industry as a whole.
You may remember back in 2013 when the price of the was increased, and around 35 percent of freight brokers were allegedly driven out of business. The freight brokering industry has more than recovered since and has been enjoying steady growth each month.
has prepared month-by-month statistics of the number of licensed freight brokers in the U.S. Starting at 13,565 at the beginning of 2014, their number has risen to 15,203 in Jan. 2015, an impressive growth rate for just one year. And there are no signs of slowing down– as of September 2015, the number had already grown to 15,909. All of this is a clear indication that freight brokering is still a profitable industry, where demand remains stable.
Many people decried the sudden sevenfold increase in the price of the freight broker bond in 2013– after all, it had remained untouched since the 1970s. But since then, the price of obtaining the bond have steadily been going down.
Why is that? The explanation is simple. are calculated on the basis of the risk the surety company is taking when underwriting the bond. In the years before 2013, the industry was rife with violations. Ever since the regulations got tighter, the overall industry’s standards increased. This means that the freight brokers that remained, as well as the ones that joined afterwards, are people doing fair and ethical business, with a solid credit history and relatively good credit scores. This raises the overall trust in the industry, and sureties have been responding by lowering the bond premiums.
Despite monthly fluctuations, 2015 remains a time , both inside the country and within the NAFTA partner countries. Around 70 percent of all freight is still moved by trucks, and there are no signs that this trend will reverse in the near future.
This, naturally, is good news for freight brokers, who act as the intermediaries between shipper and carriers. The only setback for now seems to be the ongoing truck driver shortage. Trucking companies, however, are already taking steps to address the issue.
Even though more and more people are getting into the freight brokering business, economic growth has been strong. The economy shrunk by 0.2 percent in Q1 but . Strong growth drives tightening freight capacity, which in turn leads to higher rates.
Higher rates are a good thing for freight brokers, who charge a certain percentage for every piece of freight they help move. A sharp increase in salaries was already observed once at the end of 2013 and , yearly salaries now average $92,000.
Carriers often prefer to not wait for a full load to gather, but rather move a less-than-truckload order. They have also started to warm up to the idea of outsourcing their logistics, which is of course, good news for freight brokers.
Shippers will surely be looking to adapt to the new situation, as LTL shipments will streamline their deliveries and make their customers happy. This means that shippers, too, will more often be using the services of freight brokers.
Are you an active freight broker? Was 2015 a good year for you? Start a conversation in the comment section below.
It’s that time of year again, when it’s time to talk about freight broker bond renewal. Two years ago it would’ve been a rare occurrence for most freight brokers’ deadlines to align at the same time. However, many of you will remember the controversial MAP-21 law passed in 2013. It upped and set a nationwide deadline of Oct. 1 with a grace period extended till Dec.1
Since freight broker bonds and licenses are renewed annually, this means yet another deadline is approaching for everyone who stayed in business after the $75K increase, i.e. for the majority of freight brokers. As renewal is an important expense for everyone, people often have various questions, so let’s look at some of them to give you a better idea and make your life easier.
Back in 2013, the more than sevenfold increase shocked people, so some entertained the idea that a pushback could lower prices again. Unfortunately, even after , a decrease failed to be negotiated. As a result, it’s probably unrealistic to expect a reduction to the broker bond amount anytime in the near future.
In any case, postponing renewing your bond for the very last minute with the hope that the FMCSA will bring the amounts down is not the wisest choice. In fact, starting early can give you more time to compare offers and prevent any potential lapse in bond coverage.
Technically, you should make your bond payment no later than 30 days before your previous freight broker bond expires. The BMC-84 Bond carries a 30-day cancelation clause, which means that the bond company must stay on the bond for an additional 30 days after sending out the cancelation notice to the FMCSA. This is why renewal payment is typically due 30 days before the expiration date of a policy. But as previously mentioned, waiting until the last minute to renewal your freight broker bond can be a bad idea.
The logic behind that is that many brokers tend to postpone renewal as much as they can, so there are many requests for renewal right before the deadline. This can cause delays, and there’s a chance your bond is not renewed on time. This is particularly true around October 1st of each year, as over 70% of the industry will be renewing their bond policies around this time.
Remember: it’s illegal to broker even a single piece of freight if your license expires. Your bond is filed electronically and your license status is available for everyone to see. Don’t risk losing business just because you missed a deadline. Staying ahead of the game will give you peace of mind.
Speaking of starting early, you may ask yourself if you should try a different approach this year by changing your surety provider.
The answer is: it depends. If you are happy with the services and the quotes of your current agency, it probably doesn’t make much sense to shop around. Additionally, if you shop around too much, and have a bunch of bond companies pull your credit, you may actually cause damage to your personal credit. If, however, you feel like you are paying too much, changing you surety agent to find a better fit for your company can reduce headaches and ultimately save you a lot of money.
Since they do most of the shopping for you, if you , they can negotiate a better deal on your behalf, as not all bond agencies are created equal or have access to the same specialty programs. Hint: Look for an agency that has many partnering sureties. The most trustworthy surety companies will be A-rated and T-listed.
Even though the bond amount is set at $75,000 you are right to ask this question as freight broker bonds are most typically paid in either annual or quarterly premiums. The costs can vary from year to year based on a variety of factors: your credit score, potential credit issues, years of professional experience, and the strength and liquidity of your financial statements.
Finding a bond agency with access to the most aggressive rates is one of the biggest keys to saving money. Once you’ve found an agency you’re comfortable with, be sure to provide them with as much information as possible and your quote will be as accurate as possible. There are programs available to some agencies that are based solely on credit, but other markets require full underwriting with business financial statements. If you’ve received a credit based quote, but would like to try to reduce your premium, consider submitting additional documentation to strengthen your financial position. This can often have a positive impact on what you end up getting quoted.
Have many more questions that are left unanswered? Be sure to check out which goes into great detail. If something is still unclear, leave us a comment in the section below, and we’ll do our best to help.
Editor’s Note: This is a guest blog from , a provider of freight broker bonds, among many others. Thomasholmes holds a $250,000 freight broker bond, and all 3PLs who handle transportation management must have a freight broker bond in order to do business. You might wonder, why are we talking about anything to do with acquiring or making it easier to acquire a freight broker bond? We fully believe that if we can help anyone get into the business, even if they are competitive to us, in the RIGHT way, it helps the industry overall. For years, freight brokers and transportation intermediaries have had somewhat of a black eye as there have been many players in the space who have done shippers and vendors wrong. At Thomasholmes, we want to be ahead of any bad business in the industry and so we want to offer the best information to make the best industry possible. We hope you find this post helpful.
Whether you’ve just set up your freight brokerage, or you’ve been operating for years, you know you need to obtain a freight broker bond to operate legally. As one of the main prerequisites for getting licensed, the bond is a considerable yearly expense, especially since its .
That’s why it’s important to check whether your freight broker accounting strategy is optimized, to show your business in the best light when you’re applying for a and to deter increases in the freight broker bond cost. If you’re wondering why, just consider the way a bond premium is determined.
When a surety provider reviews your application, it will take into consideration a variety of financial and business factors, so that it can estimate your liquidity and stability. These include personal financials and credit, industry experience, business financials and cash on hand. After all, a bond is like an additional line of credit to your business, guaranteeing your ability to follow the law and act according to contractual obligations.
To help you get the best deal on your bond premium, here are four sneaky accounting errors that you should avoid. They can make your brokerage look less financially stable than it is, thus increasing your freight broker bond cost unnecessarily.
One of the most important is their personal credit score. When a bonding company writes a bond for you, they are financially liable in the event that a valid claim is filed against you. Thus, the bonding process is similar to the way banks check your credit history when you apply for a loan.
That’s why not covering your liabilities before applying for a bond is an accounting error that you should address to decrease your bond cost. Finalizing previous credit payments and any other outstanding liabilities and generally making the best to increase your credit score are effective ways to present your business in a safe and stable perspective to bond underwriters.
Your overall financial status, and the profitability of your business, are both important determining factors in the formation of the freight broker bond cost. If you’re not able to showcase your assets, the surety can consider it riskier to underwrite a bond for you.
Often the easiest way to escape this situation is to work with a certified public accountant (CPA), who can consult you and prepare your balance sheets and income statements. This way, you can avoid unnecessary mistakes if you’re not trained in finances. Furthermore, review statements or compilations prepared by your staff are not considered solid proof by sureties. and thus acceptable to show your assets and general business status.
Another common factor considered by sureties when assessing your business is your cash flow status. While you might be trying to minimize cash on hand, the right cash flow is worth the taxes. The reason is that If you’re not able to demonstrate a healthy level of cash flow from operating, investing and financial activities, you might raise doubts regarding your liquidity.
As previously stated, working with an accountant and obtaining proper financial statements is a good way to avoid this mistake. In some cases, you might be specifically asked by the surety to provide a financial statement audit by a CPA that was mentioned earlier. This means that a statement of cash flow will be included there, thus guaranteeing your ability to maintain your ongoing financial operations. Showcasing your bank line of credit is also helpful, as it demonstrates you will be able to cope with cash flow deficits.
Besides the actual numbers on your statements, sureties look at the general management patterns in a freight brokerage to predict whether it’s being run in a sustainable way. If you don’t manage to demonstrate that a sound financial management strategy is in place, you might be perceived as a riskier applicant.
To address this potential error, you can again look into providing detailed papers. Within the financial statements that a CPA can prepare for you, a schedule of general and administrative expenses is included. It’s often used by sureties to estimate whether overhead expenses are managed and followed thoroughly. Along with the rest of your documents, this can be treated as a positive sign that can lower your bond cost. Don’t underestimate the value of this little document; demonstrating good money management in your everyday business expenditures can really pay off in a surety provider’s eyes.
By avoiding these accounting errors, you can present your business in the best possible way and decrease the freight broker bond cost. It’s all about providing enough proof to the bond underwriter that you are not a high-risk applicant.
What’s your experience with freight broker accounting? Do you have a strategy for avoiding any of these pitfalls? Please share in the comment section below.
As a freight broker, you know the importance of staying ahead of trends in your business. 2014 was a dynamic year for shipping and freight, and 2015 might present us with some surprising changes as well. One month in, here are our predictions for freight brokers in 2015:
For decades, globalization has defined the supply chain. Companies have shifted manufacturing outside of North America, and shipping has been consolidated to large, central import locations.
While globalization is here to stay, there are some indicators that the trend may be reversing. that more and more companies are seriously considering returning some of their manufacturing to the USA, citing several factors. Labor costs have steadily increased in China in the last decade, and as energy costs destabilize, there are strong incentives for keeping manufacturing closer to the point of sale. Consumers are also getting pickier, and domestic manufacturing offers stronger quality control, and quicker turnaround from manufacturing to sale. With some consumer goods, like clothing and electronics, this quick turnaround time is becoming more important by the day.
What does this mean for freight? Manufacturing and shipping points might be more decentralized, with smaller loads originating in more places all over the country. Shipments may have fewer miles to travel, but there will almost certainly be more to organize in terms of logistics.
After some high-profile accidents in the past year, the Federal Motor Carrier Safety Administration is looking for ways to minimize fatalities, and keep roads safer, in 2015. The current insurance minimums of $750,000 for general freight, and $1 million for hazardous materials, which haven’t been touched since 1985, are coming under particular scrutiny.
Considering inflation over the past 30 years, and the rise of medical costs, the FMCSA claims that current minimums should be raised significantly, perhaps by $1 million or more. The proposed rate hikes are meeting , however, from some industry professionals who think they are excessive, and won’t keep the roads safe.
Still, it’s likely that insurance minimums will be closely examined, and potentially raised, in 2015. Rate hikes are inevitable, and your brokerage should always keep the funds on hand for changes like these. Keep your ear to the ground for more news about insurance minimums, and plan ahead for higher insurance costs in the near future.
Of course, the best way to manage your insurance costs is to keep your record spotless. Make sure you stay up-to-date on all your necessary licenses, , and insurance premiums, and build a reputation for safe practices.
With the cutthroat competition that freight brokers already face, it’s hard to imagine the industry becoming even more competitive. However, that’s exactly what’s in the forecast for 2015. Not only is competition fierce from other freight brokerages, but other segments of the shipping industry are eager to step in as well. New transportation management technology is streamlining the entire shipping process, and some shippers are looking for ways to bypass freight brokers altogether. Meanwhile, some carriers are trying to play the part of brokers as well.
Some new players on the scene might change the face of shipping, and the role of freight brokers, even more in 2015. One start-up, , is earning a lot of attention for bringing an automated approach, similar to Uber, to transportation shipping.
With the advent of this new technology, freight brokers will be under more pressure than ever in 2015. Your brokerage can rise to the challenge, however. Use transportation management software, and automate your process, in order to increase your efficiency and make more thoughtful choices about which carriers you match with shipments. The rise of Transfix is putting more attention on wasted miles, by using their automated maps to match shipments with the closest trucks in order to reduce driving distances.
In the end, the best freight brokers will use these new tech solutions to their advantage. A great freight broker can deliver the same services that an automated system can, but the best automated services can’t offer the human touch of a great freight broker. Maximize your efficiency, while cultivating the strong business relationships that make your brokerage indispensable.
Despite some of the new challenges that freight brokers face, 2015 is likely to be a strong year for freight, and the economy as a whole. Fuel prices are low, and likely to stay that way for much of the year. This is stimulating growth at every link of the supply chain, from manufacturers to consumers, who all have more spending power.
Meanwhile, as consumers shop more, they’re also shopping more online. This means more shipping all over the country, and companies will increasingly hustle to bring quality goods and fast delivery to their customers. Freight brokers who can rise to the challenge, with improved logistics as well as integrity and honesty, have a lot to look forward to.
As a freight broker, what are your predictions for 2015? What are your biggest worries, and what most excites you about the changes on the horizon? Join the conversation in the comments below!
Send this to friend