Fleet Demand for Credit Up With Economy
This story appears in the May 5 print edition of Transport Topics.
Better business conditions for freight haulers is boosting demand for credit as well as opening the door to increased competition among financial service providers, trucking industry financiers said.
Funds flowing into the transportation sector are being used for everything from swapping out old equipment to covering extended payments from shippers and financing business expansion, they said.
“Today is a great time to be in the industry,” said Dan Clark, president of GE Capital Transportation Finance, a unit of General Electric Co. that provides leases and loans for heavy- and medium-duty trucks and trailers.
Clark, whose career spans 40 years, said the market for truck finance should remain stable for the next two or three years.
Evidence of a stronger market for lending is reflected in recent reports from equipment leasing companies.
AmeriQuest Transportation Services reported that its leasing volume grew by 20% to $157.9 million in 2013 from $132.2 million the previous year. It picked up business from Nestlé USA, Bimbo Bakeries, Kraft Foods and Mondelez International, along with food and beverage distributer Reyes Holdings, and dedicated contract carrier Cardinal Logistics Management Corp., said Mike Hamilton, senior vice president of AmeriQuest Financial Services in Cherry Hill, New Jersey.
(Kraft Foods announced last week that it will phase out its fleet of 200 tractors and 700 trailers by the end of the year.)
Fleet Advantage, a leasing firm based in Fort Lauderdale, Florida, also posted record financial results in the first quarter. President John Flynn said the company generated more than $110 million in new leases, processed orders for 1,200 new vehicles and added four large private-fleet clients in the 13-week period ended March 31.
The upbeat outlook for trucking is drawing new financial service companies into transportation.
New York City-based Fora Financial, which started by lending money to restaurants and car repair shops in May 2008, started making short-term working capital loans to trucking companies in 2013.
One of the first customers was Michael Golata, the owner of Safeway Expediting Co. in Louisville, Kentucky, who used the money to buy three new cargo vans and open a cellphone repair store. The vehicles will be used to carry pharmaceuticals for UPS Custom Critical.
The loan “allows me to pay cash, so I can make a better deal,” Golata told Transport Topics.
Jared Feldman, a co-founder of Fora Financial, said most banks no longer cater to small business and can take weeks or months to approve loans that are secured by collateral or by guarantees from the owner.
“When working with transportation companies, speed is a top priority,” Feldman said. “We can offer loans in 24 to 48 hours.”
In April, U.S. Bancorp an-nounced a program that extends credit to shippers for up to 90 days without holding up payments to freight carriers.
“Transportation is a cash-intensive business that demands timely payment,” said Rick Erickson, global director of freight payment solutions at U.S. Bank in Minneapolis. “With extended term financing, shippers can [make] their cash on hand go further, increasing the value of their freight spend and giving them greater flexibility. To the carriers, the change is invisible. They will continue to enjoy accelerated payment.”
BAM Worldwide, a company based in Atlanta, has found a way to combine business software and factoring to help brokerage firms manage payments to carriers while waiting to be paid by shippers.
Customers that use the company’s proprietary BAMWire platform can track invoices and receive payments for receivables whenever needed.
“Brokers have become virtual banks for shippers and carriers,” said Joy Duncan, director of operations. “The large majority of freight brokers are under tremendous pressure to accept longer terms from shippers and provide shorter terms to carriers, but lack the capital to do so.”
Other new entrants in the transportation finance market include:
• Diversified Transportation Finance, a division of Diversified Lenders Inc. in Lubbock, Texas, provides equipment and accounts receivable financing, plus lines of credit. President Eric Myers said the company recently extended $50,000 to a startup refrigerated carrier in South Dakota and $100,000 to a Texas-based flatbed carrier.
• Equity Equipment Finance, based in Panama City, Florida, offers a package of services, including equipment financing, remarketing, roadside assistance and warranty plans to truck owner-
operators. “We have helped many startup companies and those
with bad credit,” said company spokesman Jason Giese.
• Transport Financial Solutions is a new division of Covenant Transportation Group, a freight carrier based in Chattanooga, Tennessee, that provides dry van and refrigerated truckload service. Transport Financial will provide invoice factoring services.
• BBVA Compass, the U.S. subsidiary of Spanish banking firm BBVA Compass Bancshares Inc., launched a new transportation banking group to provide loans, revolving credit, equipment and acquisition financing to trucking, rail, shipping, logistics and air-related businesses.
This story has been updated to correct an error in the volume of new leases reported by Fleet Advantage for the first quarter of 2014. The correct number is $110 million. We reported $10 million.