TRUCKING FACTORING
Truck Finance Low rates are available... if you can qualify. Truck buyers who are shopping for good deals on financing should be pleased. With many for-hire carriers posting 2002 financial statements that are solidly in the black, finance companies who dashed with the downturn are starting to creep back into the market. Low interest rates that helped carry auto sales through the recession are starting to show up for new truck loans. According to one source, fleets with strong balance sheets may even be able to kindle a bidding war for their business. Some of the best deals — especially for smaller fleets — are being offered by the truck manufacturers or, more accurately, their "captive" finance companies. The new year brought 12-month zero-percent financing on several makes and models. Some manufacturers offered 36-month financing as low as 3% for certain models ordered early enough or purchased off a dealer's lot. In March, when some of the special offers are scheduled to wind down, it still shouldn't be hard for buyers with a solid track record to find something around 5% APR on a 60-month loan. The key phrase here: solid track record. Now, and probably for the next year or more, affordable financing is going to be like panning for gold if you're a new carrier or you don't have cash up front, a clean credit history, money in the bank, little debt and a performance record that shows you can manage a fleet. "I don't know that a lot of people out there are interested in financing over-the-road trucking companies, particularly start-ups," says Daryl Cornell, executive vice president and CFO of Team Vehicle Sales, a nationwide network of used truck centers. Cornell believes this will be the case for quite some time, since so many banks and finance companies got burned in the last trucking boom. Even when the economy and freight does show signs of lasting recovery, he doesn't think we'll see many finance companies out there on their own. Those that do come back with anything more than "A credit" lending will likely be looking for ties with dealers, truck lessors, or Internet truck marketers who can move used equipment — and who are willing to take some of the financial hit if the deal goes sour. "They've seen what will happen if they don't have a way to dispose of repossessed equipment or equipment coming off finance leases," he says. "The only way they'll be enticed is by folks like us stepping up and saying 'we understand the asset, we understand the customer, and we're willing to share in the risk but we also want to share in the reward.'" Team Vehicle Sales is putting the finishing touches on an alliance with a finance/lease company that will enable it to offer finance leases for small, private fleets and, down the road, possibly financing for used and new trucks. Even then, says Cornell, they'll likely continue to focus on private fleets and regional or local operations because it's easier to keep tabs on the trucks. One possible backer for small fleet loans: the federal government. Since the 1950s, the U.S. Small Business Administration has been offering loans up to $2 million for small businesses. The money is actually loaned by banks, but SBA guarantees from 75% to 80% of the total. Borrowers must be independently owned and operated and must meet SBA criteria for a small business. For trucking, that means annual revenues less than $21.5 million. Interest rates are low — 1.5% to 2% over prime. Fees are capped by the SBA, including a 0.5% annualized servicing fee and a 1-3% guarantee fee charged lenders which they, in turn, can pass on to the borrower. But the real advantage to an SBA loan for equipment financing is that you can borrow 100%, or more in some cases, says Lane Swenson, director of Transportation Alliance Bank's SBA loan division. That means borrowers don't need as much up-front cash. Moreover, they may be able to get financing for computers, communications equipment or even start-up cash as well as rolling equipment. SBA loans aren't for companies that can't qualify for traditional financing because of poor credit, warns Swenson. However, the government guarantee can boost the chances for a new business or a business without sufficient collateral to obtain a commercial loan. "SBA looks at the ability to repay the loan. . .at cash flow," he explains. "If the business can demonstrate that they have the ability to make the payments, that 75-80% guarantee makes the banks quite anxious to take the loan." |
ACCOUNTS RECEIVABLE PURCHASING FACTORING QUESTIONS AND ANSWERS DEBITOR-IN-POSESSION FINANCING
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