The past 12 months have been brutal for the trucking industry. But that is not a surprise when looking at the overall state of the U.S. economy. But as economists are saying that the recession is ending, what has been the impact on the trucking industry’s job market and what are the prospects for employment growth in the near future?

While the trucking industry has shed significant numbers of jobs from payrolls over the past year, many drivers remaining in the business have had to take pay cuts to keep their jobs. Additionally, small owner-operators have struggled to find loads that pay enough to make it worth their time to drive. So the true impact on the trucking industry labor market is far worse than the numbers lead us to believe.

A long-time single power unit owner based in Hesperia, California recently lamented to me about his struggles in finding quality loads. He stated that with the slump in demand and the large number of people trying to survive in the trucking industry has driven down rates and spread the freight so thin that it makes it nearly impossible to pay all of the bills. And our friend from Hesperia is not alone. Many drivers around the country have experienced the same problem and have either sold or leased their trucks to others who are trying to ride out the storm. And while freight bill factoring services have helped accelerate cash flows, the lack of available freight has brought many to the end of the line in their trucking career.

Reports have recently come out stating that trucking activity, which has a direct correlation to manufacturing and import activity, is showing signs of improvement in select regions around the country. One such area that is seeing increased activity and projecting the need for additional truck drivers is in Oregon. Experts predict that with the stabilizing economy, Oregon will see increased demand for truck drivers over the next decade. Moreover, large trucking firm CRST recently held a job fair in Long Beach, California. Reports state that truckers flocked to the job fair where job offers were made with pay ranging from roughly $400 – $1,000 per week.

So while there are signs that the job market for truckers may be recovering, true recovery could still be 18 – 24 months away. For real recovery in the trucking industry’s labor market, economic recovery must be strong and sustainable, credit markets must be loosened to allow for financing expansion in trucking, and tonnage must increase enough for the current excess capacity to be absorbed before significant numbers of jobs will be created in the trucking industry.

The Federal Reserve recently reported that trucking activity was still sluggish in many areas of the United States. Although economists are hopeful the economy has hit bottom and are pointing to economic indicators to confirm their hope, the trucking industry is still waiting for improved economic activity to help their businesses.

According to the Fed’s Beige Book, the six week period ending on October 12 showed that the health of the trucking industry was mixed. A couple of regions showed a slight improvement in activity during the period, many regions were flat during the period, and a significant number still showed declines in shipping activity during the period. Two regions that were highlighted as showing some improvement were Chicago and Cleveland, which had slight increases in freight transport volumes. Atlanta, Dallas and San Francisco were three regions that showed declines during the period.

While the trucking industry is reliant on manufacturing output to fill their trucks, manufacturing output numbers have not been all that promising lately. Many manufacturing firms are hesitant to increase production until they are certain that consumers are capable of buying their products. Additionally, with the construction market suffering like it is, flat bed truckers who traditionally haul construction materials are struggling to find freight to haul. Another factor hurting the manufacturing sector is the tight credit market and lack of financing available at banks. This has led many manufacturing companies to use manufacturing invoice factoring services to fund their businesses. 

I personally know of three truckers, all friends of mine, who are having trouble finding quality loads to haul. We can continue to hope that the economists are correct that we are coming out of the recession, and we should all pray that the recovery comes quicker than predicted. I will continue to watch the Fed’s reports and see what improvement comes for the trucking industry.

Although I advocate the benefits of freight bill factoring as a way for trucking companies to finance their business and survive the tough economic times, I recently discovered another way of ensuring your survival in the trucking industry – be the recipient of a free truck and other support services. Arrow Truck Sales sponsors a program, along with many other contributing partners, where they will give away a 2007 Volvo VNL 670 truck, as well as a one-year work agreement, business consulting services, insurance and extended warranty, plus many other great products and services.

The purpose of the program is to give someone who has been in the trucking industry, but for personal or hardship reasons had to stop driving, a second chance at a career in trucking. Thus they call it the “back on the road” campaign. Arrow Truck Sales is looking for people to tell their stories of why they are the most deserving of a second chance. I kind of look at it as the Extreme Makeover: Home Edition for truckers. One deserving driver, who has fallen on hard times yet continued to give of themselves, will be named the winner of the campaign in March of 2010.

In addition to a 2007 Volvo VNL 670 truck and a one-year work agreement with Heartland Express, the 2010 Back On The Road winner will receive:

• Custom truck paint job courtesy of Dickinson Fleet Services
• X One® tires courtesy of Michelin
• TriPac auxiliary power unit courtesy of Thermo King
• Monthly $500 fuel cards courtesy of Pilot Travel Centers
• One year’s worth of filter products courtesy of Genuine Volvo Parts
• Business consulting tools courtesy of ATBS
• Insurance provided by the Owner Operator Independent Drivers Association (OOIDA)
• A 3-year / 300K mile warranty from National Truck Protection, Inc.
• Truck accessories and fenders courtesy of Minimizer Products

Anyone interested in entering the promotion can visit the Back on the Road 2010 web site at www.backontheroad2010.com and click on the registration form link. Who knows, you or a loved one just might be the one lucky winner. Good luck!

Whether you’re a 30 year veteran of the road or an up-start trucking company, you’ve come to realize that one thing you need to keep your business from going off track is cash in hand.  There are a handful of industries – trucking, construction, manufacturing, cleaning or maintenance – where you live and die by getting paid from one job to be able to tackle the next job.  In instances where you have to wait a month or more to get paid for an invoice, you still need the cash from that delivery to buy fuel, pay drivers, maintain trucks, pay insurance, or loans on equipment.  To keep a trucking company thriving or better still, growing there are financing options like freight bill factoring to keep an influx of cash coming into the business and protecting your bottom line.

Factoring is selling your freight bill to a factoring company for a percentage of the invoice amount.  The factoring company will issue payment within a matter of hours or days and then assumes collection duties.  In addition to the quick turnaround from delivery to dollar in hand, another benefit of invoice factoring is handing over the chore of managing accounts receivable and all the time consuming paper work of collections to the factoring company.

The other upside is most factoring companies offer credit services and background checks on freight deliveries from new clients.  Since it’s in everyone’s best interest to find reliable customers for shipping freight, factoring companies can become a valuable asset in landing a great job and avoiding the dead beats.

Qualifying for financing through factoring companies is a relatively quick process that is usually turned around for approval within a few days.  The main qualifications they look at when considering approval is if your trucking business is in good financial health with a reputable customer portfolio and is free of tax problems.  Most factoring companies are accustomed to working with small to midsized companies, as well as relatively new companies who might not have established as lengthy of a credit history as more seasoned businesses.

The fact that the supply in the trucking industry has outweighed the demand for shippers and cargo has been “an accident waiting to happen”, to borrow a phrase, and the recent downturn in the economy is the symbolic banana peel in the footpath.  When any industry becomes top-heavy, as the trucking industry has over the past few years, a few of the blocks must tumble.  Call it survival of the fittest, call it classic free market economics, call it the best or worst thing that could happen to your business, but for better or worse, only the leanest trucking companies will survive until the pending rebound of the current recession (fingers crossed).

The result may be similar in result to the shake up of the airline industry over the past decade where many companies who couldn’t trim the fat and become more technically savvy were run into the ground with ballooning costs and stiffer competition.

The number crunchers and veterans of the trucking industry have predicted several outcomes resulting from the over capacity of the current market.  In terms of keeping the business afloat until the life boat arrives, price will keep customers or lure them away from someone else. Lower rates and better discounts are the bottom dollar for trucking customers who are trying to keep their heads above water too.

Companies who can survive the price cutbacks and drop in tonnage will have to make the most of every mile which might mean technological updates, better behind the scenes coordination, and higher density loads to keep things more efficient.  Stricter guidelines for coordinating hauls will mean fewer empty miles, less damage and loss, and satisfied customers.  It also means you can still pay your employees because you’re still open for business.   These kinds of reminders might make it easier to ease them into the changes you might propose. Additionally, accounts receivable factoring is another financial resource available to trucking companies to help weather the economic storm.

If you can make it to the other side of the current dearth, then your position is all the stronger as weaker competition falls away, your company has adapted to run more efficiently and prices adjust upward to reflect the newly balanced industry and improving economy.

Running a business is a tricky balancing act, but none so much so as running a trucking company.  Keeping all the balls in the air and all the trucks on the road means having a cushion of cash to fall back on when it comes time to pay for fuel, insurance, equipment loans, drivers, and repairs and maintenance, which will allow you to accept the next job so you can pay for the same costs the next month.  The trick is unless you have plenty of cash as a safety net, the freight you delivered today might not prove profitable for a month or two.  How do you pay for the costs you have today until money rolls in tomorrow?

Young companies usually feel the pinch sooner than veteran lines with deeper pockets.  One reason is that lending options are limited.  A business loan with a manageable interest rate is reserved for companies with established credit records and in the current economic climate, lenders will rarely even consider a trucking company without financials that can prove at least three years of profitable operation.  If that were the case, why do you need a business loan?

Another option is freight bill factoring or invoice factoring.  It provides more flexibility, return on invoices within days, quicker turn around on financing approval, and a greater ability to work with upstart or newer businesses because a factor’s willingness to factor invoices is based upon the credit worthiness of your customers rather than your own credit.

If you have maintained a decent credit history, secured reliable clientele, and stayed out of trouble with the tax man, you’ve likely met the approval requirements for freight bill factoring.  In which case, the factoring company buys invoices on freight already delivered and issues the majority of the payment within a few days.  The first installment is an advance and typically gives you an automatic return of up to 95 percent of the outstanding payment.  The second installment is a rebate that is kept in reserve to cover any disputed charges or damages and then is paid minus a fee once the invoice is actually paid.

The lending rate or factoring fee is calculated either daily or monthly based on volume and on how long the invoice is outstanding.  These rates average between 1.5 and 7 percent.  Most factoring companies lend under a non-recourse agreement meaning they assume the risk of nonpayment, in which case you are only out the 10 percent reserve instead of the whole invoice cost. Some factoring companies will also offer lower rates on recourse factoring, which means you still bear most of the risk of nonpayment.

There are three areas where the swine flu and the repercussions of that type of pandemic flu could potentially hit the trucking industry the hardest.  The main areas are focused on livelihood, personal health and political relations.  For starters, the business side of the issue ranges from delays in shipment due to health checks and inspections to outright bans that could affect the lucrative and industry-sustaining Mexico-U.S.-Canada cross border trade relationship.  Although such bans are premature at this point, U.S. government officials have warned it’s on the board and will be enforced if conditions worsen.

That being said, smart companies should outline a contingency plan not just to protect their assets, but their employees as well.  The government has issued a pandemic guide to help highway and motor carriers prepare, respond and recovery.  Because trucking will be a life-line during times of medical emergency, a strategic outline is important to your company’s financial and physical well being.  Truckers are front line responders because they provide the means to get food, clothing, medical supplies, and other essential items to the affected areas. 

On the health note, the swine flu can threaten those closer to home as well as those you only read about in the newspaper.  The health of your employees should be paramount and because of the increased risk that long hauler truckers who travel extensively face, they should be educated about precautions, symptoms and the risks associated with swine flu.  Vigilance in safe health habits is more important than ever and inform them of what they can to be more cautious.

The long term impact of the swine flu might be seen in the political impact this could carry for cross-border relations.  The shutting down of boarders could delay ongoing tariff negotiations between Mexico and the U.S. as well as deter consumers from purchasing products from Mexico.

South Dakota banking is evolving to meet the challenges of the financial times with the opening of the first in-house factoring division within the state.  FirstLine Funding Group in Madison, SD is a new commercial finance division of First Bank & Trust which specializes in freight bill factoring for trucking companies and businesses associated with the transportation industry.
 
True, factoring in and of itself is not a new service statewide, but the fact that this is the first time that a mainstream bank has made it part of its lending practices is notable first, for the acceptance and approval of the practice by established lenders, and secondly, for the profitability and reliability of factoring both as a lender and as a customer.
 
Factoring involves a lender purchasing invoices for a percentage of cost and then assuming the collection of payment.  The practice is particularly beneficial in industries that are cash driven like the trucking industry where cash flow is vital to keeping the truck on the road and freight moving.  Oftentimes freight invoices can take a month or more to be issued and paid, and in the mean time owner’s are looking for cash flow to pay drivers, make insurance premiums, and keep up truck maintenance and repair to accept the next job.
 
The other upside of using an invoice factoring service, particularly one with resources like FirstLine Funding, is their ability to research credit and payment history for potential deliveries the trucking company is considering accepting. 
 
FirstLine Funding, like other financial companies who offer freight factoring, manage collection on goods already delivered.  Like any lending agent, they look for investments with a clean credit history, a dependable freight payment record, and financial records in the black.  Factoring is not really a great option for those companies already in the throws of financial difficulties, but for a business looking to turn over the collection duties to keep cash flow coming, it can be a great option.  It’s a great fit for someone looking for a partner in accounts receivable financing rather than a lifeboat for a sinking ship.

It was a poor showing for the trucking industry the first half of 2009 as the tonnage index faltered with back-to-back monthly decreases in February and March.  The numbers reported by the American Trucking Association (ATA) said the year started on the upside but by March had quickly hit the biggest slump since things bottomed out in December 2008.  Although overall tonnage is up from February, that news is deceiving as traditionally March has marked 15 to 20 percent gains. Comparing tonnage from last year’s numbers, March shrunk by 12.2 percent in tonnage.

To more easily compare numbers from month to month the ATA seasonally adjusts their index and numbers for the March For-Hire Truck Tonnage were down 4.5 percent which virtually erased any gains made at the first of the year. Following a disappointing holiday season in November and December the trucking industry is facing a decrease in tonnage it hasn’t dealt with for over five years.          

Since the trucking industry is considered an important indicator of the economy as a whole, everyone from diesel fuel distributors to manufacturers to retailers are feeling the pinch.  To add insult to injury most industry watchdogs are saying the worst is still to come.  ATA’s chief economist and a handful of others have issued statements since the March numbers were reported and the consensus is that recovery is a going to be a long haul, and the end of the road isn’t in sight yet.  Their only advice for now is to keep on trucking.

With many trucking companies feeling the cash flow squeeze in these tough economic conditions, large numbers of trucking companies are turning to invoice factoring, or freight bill factoring, as a way to improve their cash flow. Invoice factoring has many advantages over traditional bank financing, and I will discuss just a few of these advantages in this article.

First, by factoring their freight bills, trucking operators do not need to go through the hassle of filling out loan applications at their bank only to be told that they don’t qualify. Although most factoring companies have an application form, it is generally shorter and easier to complete than a bank loan application.

The next advantage to factoring is the speed with which a trucking company can obtain cash. Since cash is the life blood of every trucking operation, having a stable, steady cash flow is critical to ensure long-term success of the business. Most factors can review and approve an application in 24-48 hours. Additionally, once approved, a factor can purchase a freight bill and get cash into the trucking company’s bank account in 24 hours or less. The application and funding turnaround time is generally significantly shorter with a factor than with a bank.

The final advantage to invoice factoring I want to touch on is credit worthiness. Unlike a traditional bank loan, factoring is not dependent on the trucking company’s credit worthiness, but rather the credit worthiness of the customers or debtors paying the invoices. If a trucking company does business with financially solid, reputable businesses, factoring companies should have no problem buying the trucking company’s freight bills.

Freight bill factoring can provide a trucking company with the cash it needs to cover its day to day expenses such as fuel, insurance and payroll. And while it may not be considered a traditional method of financing, factoring has been around for hundreds of years and is a financial tool trucking companies should not rule out.