Truck lenders must be ‘proactive, not reactive’ during freight downturn

MINNEAPOLIS — While some equipment lenders have pulled back from the transportation segment in recent years, others are determined to find financing opportunities. 

Twenty-one freight carriers filed for Chapter 11 bankruptcy in the third quarter, following 20 in Q2, and highlighting the yearslong freight downturn. The trucking industry continues to grapple with rising operating costs, low freight rates, tightened lending standards and tariff uncertainty.  

To achieve financing growth and secure credit lines despite market challenges, lenders must “always be proactive, not reactive,” Eduardo Cruz, president of Addison, Texas-based Commercial Equipment Financing, told Equipment Finance News at the National Equipment Finance Association Conference today. 

“When you’re reactive, you’re trying to find a new bank for a deal. I don’t find a bank for a deal. I find a deal for the banks.” 

— Eduardo Cruz, president, Commercial Equipment Financing

Being proactive requires a thorough audit of a business, requesting references and consistent communication, Cruz said. 

In addition, lenders must adhere to their credit parameters during a market downturn, Bob Rinaldi, president of Rinaldi Advisory Services, a consulting firm for equipment lenders and OEMs, told EFN at the conference. 

“Either you’re in the business or you’re not in the business,” he said. “As long as you stay in that market, you know it’s going to heal itself at some point.” 

Rinaldi said he doesn’t expect a major setback in trucking “unless we hit another COVID-type scenario that changes all of the supply chains overnight.” 

“You just have to stick to the knitting and not chase things,” he said. 

Keep clean books 

Many transportation firms are struggling to secure financing as credit standards tighten. However, carriers can increase their chances of obtaining a truck loan by “making sure their books are clean,” Cruz said. 

“Now, more than ever, I’m seeing lenders ask for bank statements, especially in transportation,” he said. “On top of that, make sure they don’t have any recent lates. If you have a recent late [payment] right now, within 12 months, it doesn’t look good.”

“And it doesn’t matter if it’s small or big. The blemish is a blemish.” 

— Eduardo Cruz, president, Commercial Equipment Financing

For small fleet operators, it’s important to have additional sources of capital apart from their business, Cruz said. These may include 401k savings, an Individual Retirement Account or any other financial means, he said. 

“That way, if something does happen, he does have somewhere to draw from,” he said. “It’s just not here in his bank right now.” 

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