Truck lender CEO says not using AI for underwriting gives competitive edge

CAG Truck Capital is among the many lenders that view AI-powered underwriting as a competitive advantage. That’s because it’s not using the tech.  

Although the truck lender uses AI for some processes, such as asset valuation, AI is not conducive for underwriting at CAG because of the company’s unconventional approach to gauging creditworthiness, President and Chief Executive Chris Grivas told Equipment Finance News.  

The company places more emphasis on “roots and resourcefulness” rather than traditional metrics such as credit score and time in business, he said.  

Grivas said CAG asks these questions to assess a prospective borrower:

• How did you hear about us?
• How long have you been around trucking?
• Do you have friends or family in the trucking business? 

In other words, knowledge of trucks and the ability to navigate industry challenges outweigh strong credit history, and humans can more effectively evaluate these factors than any AI model, Grivas argued.  

Digging deep 

For example, he said one applicant had a credit score in the 500s and was looking to buy his first dump truck. In most lenders’ eyes, this borrower “doesn’t stand a chance” to qualify for a loan, he said.  

However, CAG learned that the applicant had been driving for his uncle for the past five years.  

“Not only does he drive for him, he also does diesel repairs and even engine rebuilds for him because he learned that as a kid working for his father on the farm,” Grivas said.  

When asking the borrower if he could get a co-signer for the loan, he returned with five potential co-signers. Lastly, the applicant had $25,000 for a “serious down payment” to put toward a $100,000 truck and even offered to cover the sales tax. 

“AI is going to turn that boy down in every conceivable model that any of our competitors have,” Grivas said. “We’re going to see it for what it’s worth because this kid can get five people to stand behind him, drives for his uncle, can rebuild an engine in the dark and drops $25,000. That’s where I see AI working to our advantage.” 

For CAG, AI cannot dig deep enough to identify quality borrowers, although that could change as the tech evolves, he said.  

What’s in the box? 

Grivas acknowledged that lenders with a clearly defined credit box can benefit from AI-driven underwriting because then the process is more deterministic.  

That is why BECU trusts its AI underwriting model to make roughly 60% of credit decisions and plans to reach 95%, Andy Wing, director of indirect lending and dealer management at the $29 billion credit union, said during a panel discussion last month at the FinAi Lending Summit in Las Vegas.  

“We do our best to have super consistent policies and procedures,” Wing said.  

Straightforward underwriting is tailor-made for AI because it’s easier to build a rules engine that “checks a box very quickly,” Rohit Arora, CEO of SMB lending marketplace Biz2Credit, told FinAi News, a sister publication of EFN. 

“When you have other complexities involved, in terms of either collateral-based lending or other things, I think that’s where it gets more tricky,” he said.  

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