As rates have crashed and freight volumes have dried up — unless you are hauling grocery or other essential goods — trucking companies across the country are at increasing risk of failure. The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was designed to protect just these types of businesses. Unfortunately, many are falling through the cracks, according to KeepTruckin, which is why the company has started a petition drive asking Congress and the Trump administration to extend financial assistance included in the CARES Act to truck leases, loan payments and insurance payments.
The CARES Act authorized the Paycheck Protection Program (PPP), which grants small employers, typically those of 500 employees or fewer, that maintain their payrolls eight weeks of cash-flow assistance through federally guaranteed loans.
“If we fail to preserve and protect our trucking capacity for post-COVID-19, our economic recovery will suffer and that is not an acceptable option,” Tavis Baskin, head of regulatory affairs for KeepTruckin, told FreightWaves. “The PPP contains oversight measures to ensure that funds are used in the manner intended.”
Those funds, though, are limited when it comes to helping small trucking companies and owner-operators. PPP funds can be used to cover payroll costs, interest on mortgage obligations, rent and utilities in forgivable loans. Under the terms of the PPP, employers can borrow up to $10 million at a calculation of 2.5 times payroll at terms that are described as extremely generous to nonexistent. There is no requirement to pay back the loan if certain criteria regarding keeping people employed are met.
Three-quarters of the loan money must be paid out in payroll, explained Randy Hooper, partner at the transportation consulting firm of Katz, Sapper & Miller.
However, PPP doesn’t address some of the key costs that small fleets and owner-operators have, KeepTruckin said.
“The PPP is a strong first step toward providing economic relief for small businesses. However, it does not address the fixed-costs burden that is unique to the trucking industry — truck and trailer lease/purchase payments and insurance costs,” Baskin said. “Without targeted relief in the form of forgivable loans, many trucking companies will not be able to weather this storm.”
Baskin compared trucking to other businesses.
“A leased or financed truck with valid insurance is the trucking equivalent of a rented or mortgaged workplace with utilities: The truck is the shop and insurance is the utilities allowing the truck to be productive,” he said. “However, payments for a truck and insurance are not forgiven under the PPP, which puts the economic burden on the borrower by requiring repayment. We are asking lawmakers to extend the kind of forgivable relief that helps restaurants, hotels, plants, shops and other brick-and-mortar businesses to cover the trucking equivalent of rent/mortgage and utilities: truck payments and insurance.”
Baskin said some insurers and borrowers are acting in good faith and assisting truckers, but a more formal, federal response is needed.
“We have seen many examples of lenders and insurance companies proactively helping their customers; however we can’t leave this to goodwill,” he said. “We need coordinated action at the federal level to ensure that our trucking companies can see through the next few months and be available and online when industrial production rebounds and freight needs to be moved.”
The petition calls for action from legislative leaders in any future COVID-19 legislation.
“In the next legislative vehicle relating to COVID-19, the federal government must address the unique needs of this essential industry by providing forgivable loans that target the two major fixed costs that trucking companies face — truck and trailer lease/loan payments and insurance costs,” the petition states. “This aid is critical to protecting America’s trucking capacity and supply chains, today and into the future.”
In the petition, KeepTruckin said it has observed a 24% decline in vehicle utilization over the past 30 days in its network, which has 250,000 for-hire trucks.
“The impact has not been evenly distributed,” it added. “In the West Coast and Northeast, regions that enacted shelter-in-place first, we have seen a 38% and 31% decline in activity.”
The carriers that are operating are also seeing declining rates, yet their fixed costs remain stable. In the Keep Truckin survey, 37% of respondents said they had serious concerns about their ability to meet truck lease and loan payments or insurance payments over the next three months.
There is another program available to small businesses. The Economic Injury Disaster Loan (EIDL) program offers economic relief to businesses that experience a temporary loss of revenue. When first launched, the program was designed to supply loans of up to $2 million, but the website now states it offers loans up to $10,000. Politico reported last week that the program has received applications for $372 billion in funding but only had appropriations for $7.3 billion.
The EIDL program is open to independent contractors.
The Small Business Administration administers both PPP and EIDL.
“Without targeted economic and regulatory relief, many trucking companies will default on their lease or loan payments and risk losing their trucks. And those who fail to cover their insurance payments will lose their DOT authority,” the petition notes. “This is not an acceptable outcome. Preserving our nation’s trucking capacity is critical to our economic recovery post COVID-19. It is essential that when industrial production rebounds, trucking capacity is not constrained. We cannot allow America’s trucking companies to fail or we jeopardize the broader recovery.”
Keep Truckin is asking that the federal government provide “economic relief that addresses the unique circumstances that trucking companies face and recognizes the essential nature of their work. This includes basing federal loans on not just payroll, but also fixed cost obligations. And providing forgiveness for truck and trailer lease/loan payments, and insurance costs.”
