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Truck Financing: Does Your Lender Give You Proper Credit?

CALGARY, Alta. - Canadian motor carriers often approach the subject of financing with a certain amount of dread.

CALGARY, Alta. – Canadian motor carriers often approach the subject of financing with a certain amount of dread.

The fact is, a lot of banks have little interest in the motor carrier business. Freight haulers have operated on tight budgets and thin profits in recent years, so their balance sheets aren’t always rosy. Many carrier companies have to deal with indifferent bankers who don’t seem to know, or care about, the issues truckers face.

Fortunately, not all lenders thumb their noses at motor freight companies. Low interest rates over the past several years have created more competition among financing companies. That translates into better service and more favourable terms. Some lending institutions even specialize in the transportation industry, so they are knowledgeable about the trucking business and are eager to work with carrier companies.

Carrier companies who are fortunate enough to find a good lending partner reap numerous business benefits. In the old days it was all about low interest rates. Not any more. Today financing companies can often be true business partners who help reduce costs, save time and provide a certain amount of stability in a chaotic industry.

“We actually work with three financing companies,” said John Kohut, Jr., of Hiway 9 Express in Drumheller, Alta. “But there is one which we use most often. They’re very co-operative and give us great flexibility, and they’re very easy to do business with. We can now get deals done quickly with less paperwork.”

Kohut, whose company operates 160 tractors and employs about 280 people, said that working with a good financing partner pays dividends in both money and time saved.

“We sit down with our financing company at the beginning of the year and set a capital spending budget. We have a line of credit with pre-set interest rates. We typically buy about 30 pieces of equipment a year, so this arrangement makes equipment purchasing much simpler for us. We save a huge amount of time because we don’t have to go through the loan approval process with every deal.”

Kohut also likes the flexibility of having a line of credit and the stability of a set capital spending budget.

“When we need a piece of equipment we can go get it and put it to work as quickly as possible. Also, having a predetermined line of credit and a regular monthly payment schedule allows us to set a monthly budget and stay within that budget. That’s helpful for planning purposes,” Kohut notes.

Lenders often speak of partnership and service. Some business owners may think those words are a smoke screen for higher rates, but most motor carrier executives have come to understand the benefits that a good lender can provide.

“Rates are not always the issue with me,” said Bob Hill, owner of Hill Brothers Expressway, Ltd., a Calgary-based carrier with 50-plus tractors. “Some banks are aggressive, demanding and inflexible. I prefer to work with a company that is personable and cares about my business. I’m loyal to suppliers that I can trust.”

Trucking companies that learn to trust their lenders often turn to them for cash flow management advice. That’s when the relationship becomes something like a real partnership.

“We can often help trucking companies reduce their taxes and improve their cash flow by restructuring their financing,” explained Geoff Best of GE Canada Equipment Financing. “Debt consolidation can provide enormous benefits. Aside from reducing the administrative burden of managing many individual payments, a single loan or lease facility can be designed to address whatever issue the company deems important – taxes, cash flow, or even to unlock the equity in their equipment to fund growth or an acquisition. A lot of carriers are unaware of this.”

Flexible payment terms are another benefit of having a financing partner. Some carriers have seasonal highs and lows. Sometimes unforeseen circumstances (the BSE scare, the B.C. forest fires, etc.) can create short-term business slumps. A true financing partner understands these problems and will work with motor carriers to help overcome unforeseen economic events.

“We do a lot of lending to transportation companies, especially small operators,” said David Duval, a corporate account officer with Money in Motion, a business lender with offices in Toronto, Sudbury and Thunder Bay. “Our business is all about relationships and service. A lot of trucking companies restructure their loans when the economy is bad. So, you want to do whatever you can to help them stay in business and grow.”

In the trucking industry, the obvious ingredients for success are fuel, horsepower and shipping schedules. Not so obvious are financing, payment plans and tax savings. Smart motor carriers have learned that they can save time, money and frustration by working with a dedicated lender who is interested in the trucking business.

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