Factors are increasingly providing the needed
financing to the hard-hit trucking industry.
Industry insiders believe that trucking will be one
of the first industries to see a recovery as economy
Specialized freight factoring firms have sprung up
to serve this niche market.
Industry knowledge is important, because the
factor must understand both overall credit risk and
the make-up of freight invoices.
There’s a saying that “As goes trucking,
so goes the economy.” After all, at some
point a transportation company moves
virtually every consumer product. “We
can’t live without trucking,” said Chuck
McDowell, Transportation Division
president at Gulf Coast Business Credit.
“You can regulate it into the ground or
have a meltdown in the economy, but
you still need trucks to support any
standard of living.” This is one reason for
the widely held belief that the trucking
industry, arguably the backbone of the
U.S. economy, is a leading indicator that
precedes general economic trends by six
to nine months.
The current recession, which is the
worst economic downturn since the
Depression, has had a disastrous impact
on the trucking industry. Small trucking
companies are slowly disappearing —
either closing up shop or consolidating
with larger firms. Margins are being cut
to gain a competitive edge, and small
truckers often find themselves without the guarantee of a return load.
Perhaps the declining availability of
conventional cash flow or asset-based
lending (ABL) for trucking companies
has had the biggest impact — some
lenders simply do not wish to lend in
the trucking industry. Thus, factors
are increasingly providing the needed
financing to keep trucks on the road.
Declining sales and margins, industry
consolidation and shrinking credit first
hit the trucking industry a few years ago.
Unfortunately, despite some limited op-
timism late last year, current indicators
are still weak and there are no visible
signs of improvement in the trucking
industry. Jim DiCamillo, executive vice
president at RMP Capital Corp., believes
that whether the economy is improving
won’t be seen until well into 2010, when
the seasonal increase on product ship-
ments begins in earnest.