What Is a BMC-85 Surety Bond
The federal regulation that mandates a security need may be satisfied in a few different ways, which is convenient for licensed freight brokers. To satiate the requirements of this law, one might acquire a BMC-85 Surety Bond.
The protection of the general population from suffering monetary setbacks is the goal of this course of action. In the event that a freight broker fails to do business in accordance with the legislation that regulates licensed brokers, a claim may be brought against the BMC-85 in order to reimburse any losses that have been suffered.
Freight brokers with a valid license have the ability to establish a BMC-85 Surety Bond, which serves the purpose of a deposit account for any potential future claims against the company. A trust account that meets the minimum security standard for freight brokers and is handled by a trust custodian is referred to as a BMC-85.
This account must contain at least $75,000. This deposit is put into a trust for the purpose of paying out claims. However, in contrast to a BMC-84 Surety Bond, the broker is the one who is responsible for putting money into the trust account when it is first set up. To put it another way, establishing a BMC-85 trust requires an initial payment of $75,000 in the form of cash or other liquid assets.
In the event that a claim is lodged against a licensed freight broker who has a BMC-85 Surety Bond, the trust custodian transfers the amount of the claim to the claimant from the remaining balance of the trust, which is $75,000. In order to continue to fulfill the requirements for obtaining a license that have been established by federal legislation, a freight broker is required to refill the trust whenever claims are paid out. Claims may be expensive for freight brokers since in order to be compliant, the BMC-85 Surety Bond must always have the entire amount of money contributed to it.
BMC 84 vs BMC 85
Both a BMC-85 Surety Bond and a BMC-84 serve the same goal, but they do so in distinct ways with regard to how they are funded, how they are maintained, and how much they cost.
In order to become a freight broker, one of the most important steps is to satisfy the need to maintain a trust fund or bond in the amount of $75,000. This condition is imposed by the Federal Motor Carrier Safety Administration. (FMCSA).
Although it is not the same as liability insurance, this money is utilized to safeguard the partners and clients of a freight broker. It guarantees that the broker will fulfill their responsibilities, pay their carriers on time, and conduct their business in a legitimate way.
- The complete sum of $75,000 must be put by brokers into a trust fund, after which the money cannot be accessed by the brokers in any way.
- When you purchase BMC-84 Surety Bond, you have the option of paying the required $75,000 in installments over the course of a year or month, therefore freeing up significant cash that may be invested elsewhere. This may be of tremendous assistance to small brokers who are trying to get the most bang for their buck out of their first investment.
- Your credit score, the length of time you have been in business, as well as the health of your company’s finances will all play a role in the determination of the rate you will be charged for a BMC-84 Surety Bond.
- A cash deposit in the amount of the whole $75,000 collateral is required to be made with a trust business in order to get a BMC-85 Surety Bond.
- On a BMC-85 Surety Bond, the majority of trust firms impose a yearly bank fee that ranges from one to two percent.