The Buck in Trucking

“If you don’t have the marketplace of lenders, yes, it can be problematic,” said Cheryl Tibbs, Owner/CEO at Equipment Lease Co about providing capital to the trucking industry. “If you don’t understand the trucking industry, it can be very problematic.”

In the last year, there has been an increasing interest in equipment financing. It was the primary topic of a panel discussion at Broker Fair and the subject of several sidebar conversations throughout the day and thereafter. For Tibbs, who lives and breathes equipment finance and trucking, she said she doesn’t see funding in that space slowing down.

“Every business that’s in business needs some type of equipment to operate,” said Tibbs. “Whether it’s a cell phone, a POS system, a car or truck, excavator, whatever it is, every business has some type of equipment. So I don’t see the industry slowing down at all.”

Tibbs, for her part, says that some companies in her lender network can provide a uniquely beneficial solution, a funding bundle that is part equipment finance and part working capital.

“Some of those customers may need that working capital for a down payment or if you’re buying a truck, for instance,” Tibbs said. “And this working capital comes in handy because if you know anything about trucking, the insurance on those things can be– I’ve seen it go as high as 60,000 a year, almost half the cost of a truck. So that working capital comes in handy.”

And the costs of trucks is in a state of flux. Jonathan Nelson, General Counsel at Dedicated Financial GBC, said the costs of used trucks is rapidly shifting.

“This month, you could get $20,000 for this particular used truck on the East Coast and next month, if you were to sell it on the West Coast, you might get $40,000,” said Nelson. “It’s very volatile at the moment.”

Evan Sowa, Senior Finance Manager at Everlasting Capital, echoed same.

“Depending on the geographical market, prices on the same truck can vary substantially,” he said. “Market prices are as high as I have ever seen them, up to 80% higher than similar units 4 years ago.”

Sowa continued by explaining that demand and prices in the used truck market have been booming but that they’re finally starting to cool off.

David Lee, CEO at North Mill Equipment Finance, said there are some issues in the wider trucking market right now.

“The trucking industry is facing a lot of challenges currently,” Lee said. “In addition to supply disruptions, and an inflation in used asset values and unavailability of newly manufactured equipment combined with significant increases in diesel fuel costs, a number of operators have felt tremendous margin pressure, with load rates having decreased, the cost of the equipment being higher, and the cost of operating the equipment via fuel being higher.”

A lot of those costs have not been able to be passed on to shippers, Lee added, and he said that they’re seeing a material increase in delinquencies and defaults amongst trucking operators.

Nelson at Dedicated, speaking on a much broader level of equipment finance, said that in general the industry has been able to escape the wave of defaults happening in other industries.

“We are a part of the National Equipment Finance Association and the Equipment Leasing and Finance Association to make sure that we understand issues and different trends that are happening in the equipment finance industry, because that’s where most of our clients are,” he said.

Tibbs, who’s a super broker, explained that she has seen lenders and funders tighten up their guidelines post covid.

“It’s not as easy to get plugged in with certain lenders,” she said. “It’s not as easy to get certain deals approved that we probably could have gotten approved pre-pandemic.”

Because of her experience and relationships, however, Tibbs is optimistic about the kind of deals she can get done, especially over newcomers who are at a disadvantage, explaining that she can finance pretty much anybody.

Evan Sowa at Everlasting summed up the state of things as such.

“Still funding trucks every day but the market is crazy right now,” he said.