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Surety Bond

Discussion in 'Insurance' started by loaders, Aug 1, 2012.

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  1. loaders

    loaders Site Supporter

    I didn't mean to sound so harsh in reference to" basement brokers". I was trying to explain that if a carrier feels uneasy about establishing a relationship with any company, then simply don't do it. The basement broker handle only enhances that negative opinion of "brokers are a necessary evil". Your absolutely correct Freight Broker, everyone has to start somewhere. Although it is 20+ years ago, I can remember the sleepless nights worrying about having enough money to pay the carriers who were gracious enough to go out on a limb and provide me with service. Fortunately things worked out and those carriers are now my "go to guys" for most of our freight. The man is also correct in his description of the smaller, more flexible carriers, who whenever possible, are the ones we prefer to deal with.
     
  2. Freight Broker

    Freight Broker Well-Known Member

    Everyone has to start somewhere.. in 2005 when I started my business I was making about $100.00 a week... I remember one week really well..I had gotten two orders in one day and had a take home (well...I was home anyway) of almost $140.00!!!

    Although I do much better now I don't look down at the "basement" brokers. No matter how small the business is...they have the balls to go out on their own instead of pissing and moaning about how hard their job is and how unfair life is. I respect anyone who runs a business of ANY size... especially the small entrepreneur who gives it his all.

    If you're a small business owner have faith...work hard.. and keep on truckin... there's no shame in being small.. There is shame is pissing on about how bad things are and not doing anything about it like some of those people on TV who cry about their hourly wages being cut from $75.00 an hour.. We (and I include the basement brokers) live and die by performance and earned commissions.
     
  3. theman

    theman Well-Known Member

    The reason why this applies to carriers moving extra freight is because it's an old tactic ... have a couple of crap trucks running city work but broker everything else, and you skirt the law.

    Sheldon is a case in point.
    Who remembers Rockman Trucking?
    G Roch had Krystel which in fact was the same (I know that's over).
    ISG played that trick for many years and still does!

    I'm not saying all of those types are out to stiff everyone, but the line has to be drawn.

    Personally, I think being up front and honest as much as you can be is the best way to go. If you're a broker, be proud of it and have no shame. If you're a carrier, well that's great too. If you're fortunate enough to have the resources to do both well, even better.

    The $75K bond isn't going to make a guy like Freight Broker who runs a one-man show with $4M sales go down, and it's not supposed to. But a marginal one-man player that does say $600K a year, probably yes. But those players are what we call the 'basement brokers, house of cards' type of deals.

    The best type of brokers -- and carriers in my opinion -- are the ones that are large enough to have the resources to serve but still agile enough to 'flex' with their customers and the market. Sometimes too much size breeds arrogance ... and the ones that are too small generally don't have the resources and/or clout to really add any value.

    I may have been rambling. Oh well.
     
  4. Freight Broker

    Freight Broker Well-Known Member

    Don't be so hard on the Mom and Pops... some are nice people...some treat their carriers very well...some make a darn good living from their homes. I'm a one man 4 million dollar/ year operation myself. I choose not to have employees...or to waste 20% of my life commuting to and from work... But I guess because I work from a house I'm not a pro.. Right now I'm still working... I have a very large office that overlooks my treed lot.. I'm sipping a glass of wine to cap off the day. Now..I SHOULD go from "mom and pop" to professional... I have several acquaintances who have done that... who rent dirty digs in an industrial wasteland that they have to drive to from everyday. Their employees slouch about in cargo pants and tank tops... the carpet is worn out, the walls are dirty and the toilet hasn't been cleaned since 1988. Yuck..I think I'll stay a "mom and pop"..(well just "pop" in my case I guess) and happy to do business with the one truck owner-operators who, like me, also aren't pros because they too run their business from home.. Got to run now...my wife just called to say that my steak supper is ready.. got to commute over to the patio now to enjoy supper with my wife and kids.
     
  5. Rob

    Rob Site Supporter

    Okay thanks I guess alot of carriers will be looking for bonding companies, And I know of some real good Mom and Pop brokerages some run from a house but most have an office. If this can get rid of the Tony's and the likes of him more power too it but I have my doubts.
     
  6. Rob

    Rob Site Supporter

    Okay - I was my understanding from what I had read so far that the grouping was not in the law. But the small guys wanted it put in as not to push them out. I personally find the small brokerages more helpful and better paying than the large mutinationals.
     
    Last edited by a moderator: Aug 1, 2012
  7. loaders

    loaders Site Supporter

    Yes Rob, "basement" brokers probably do exist, but why in heavens name would anyone want or have to deal with them? Isn't it a better business practise to deal only with entities that have some substance and longevity? Who cares what they do and if they have authority/surety bonds, etc., etc.. Just leave them out of the equation.
    The answer to your question "why would a carrier need a bond to sell off excess freight?", if you perform the function of a freight broker, then you have to abide by freight broker regulation.
     
  8. ShawnR

    ShawnR Site Supporter

    this is where the new 'grouping' law can come in & help them get this by re-grouping with other smaller operations.

    this is also how many people will be able to get the new bond, etc for a lower cost than most think they will need to pay, they just need to look into the right bonding company.
     
  9. Rob

    Rob Site Supporter

    No Freight Broker

    Don't get me wrong here. I understand why brokers have a bond. I am asking why a carrier would need one to sell off excess freight? Basement brokers and we all know they exist probably do not have one anyhow. And by they way I do have customers as a matter of fact. Still have our very first customer from 15 years ago. I realize larger brokerages have the 75K capital but in all honesty how many small Mom and Pop brokers have that kind of investment unless they are going to put up their house?
     
    Last edited by a moderator: Aug 1, 2012
  10. ShawnR

    ShawnR Site Supporter

    yep, the biggest issue is enforcement, not the law...
     
  11. loaders

    loaders Site Supporter

    The new legislation also "forbids motor carriers from re-brokering freight without proper broker authority and bond". So if a US licensed carrier discovers he has over-booked himself and wants to broker his 'excess" freight, he must have property broker authority and the surety bond. Sounds like all they have done is level the playing field. It doesn't matter if your primary business is brokering freight or hauling freight, once you sell freight to another carrier, you have become a broker and must abide by the rules for all brokers. Like all legislation, the test will be how actively it's enforced.
     
  12. Freight Broker

    Freight Broker Well-Known Member

    You're being silly.. go out and find your own customers (or try to anyway) and you'll quickly discover that a phone/fax line and a loadboard don't make a broker anymore than a notepad and a dictionary makes a lawyer and calculator makes an accountant. Getting financing for a truck is alot easier than securing a large account...I've done plenty of both. To finance a truck you need okay credit and a little bit of a downpayment..the risk isn't yours..its the lendor's. So you take the truck you financed and put it on with a carrier who does all the work for you other than keeping it between the white lines. Big deal.
     
  13. ShawnR

    ShawnR Site Supporter

    I believe with the new law they do actually mean that carriers will need a Surety Bond to broker any freight.

    This Bond is to secure payment to the carrier actually hauling the freight not for the 2 points mentionned above.
     
    Last edited: Jul 31, 2012
  14. theman

    theman Well-Known Member

    A carrier's bond is different. A carrier generally has 2 different types of bonds:

    a) a liability bond that I believe is only set up once and doesn't need to renew ... which is a surety

    b) customs bonds so that they are able to carry loads in bond when need be ... not the same thing

    A broker carries a surety bond by law (and it's true, if you do US business, you need to have it, but the same law doesn't exist in Canada as far as I know). The bond is something in trust for carriers to collect from in case they can't get paid. I think we all agree $10K is a joke. Even $75K isn't a lot ... a start-up one man operation can generally bill that in a month.
     
  15. ShawnR

    ShawnR Site Supporter

    Seems too many carriers have bought carrier authority, never had any trucks, and brokered out freight. This should prevent this happenning in the US, or so they are trying to prevent it.

    Let's keep it clean.
     
  16. Rob

    Rob Site Supporter

    Just a question why do carriers need a bond if brokers only need to show $75k in capital. That is one truck and trailer for a carrier and a used one at that. Carriers unlike basement brokers have an investment not a phone line a fax US Load boards and the link!!
     
  17. ShawnR

    ShawnR Site Supporter

    hopefully carriers will notice they do not have a bond and refuse the freight, or at least they shouldn't complain that they don't get paid if they do have issues.

    I believe this will strengthen the carrier industry. Less carriers will get "screwed" as they will actually be able to collect on the Bonds.
     
  18. Shakey

    Shakey Site Supporter

    And Carriers that broker their freight as well that do not have one
     
  19. loaders

    loaders Site Supporter

    It certainly should be one of the many items a carrier should check before doing any business with a broker. If a broker can't afford the few hundred dollars it costs to put a bond in place and by doing so, be in compliance with US law, then I would question their ability or willingness to pay your invoice. Any educated shipper would surely call them out on it as it could put them at risk.
     
    Last edited: Jul 31, 2012
  20. Freight Broker

    Freight Broker Well-Known Member

    Many load brokers in Canada operate in the US and have no bond whatsoever...I guess it will simply be business as usual for those guys.. I can name names...but the list would be too long..
     

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