In a sign of growing confidence in the U.S. economic and freight recovery, banks are pouring more capital into smaller trucking firms for the first time in nearly three years, according to PayNet, a firm that tracks lending activity across six industries, including transportation.
The Skokie, Ill.-based company found that the dollar value of new loans made to trucking companies that have never owed more than $10 million rose six percent in the first quarter of 2010 over first quarter 2009 levels. The first-quarter results represent the first year-over-year increase in dollar-based truck lending activity in eleven quarters, according to Thomas Ware, senior vice president of PayNet.
Ware said the firm does not keep empirical data on loan origination activity. However, he says that anecdotal evidence leads him to believe that the pace of originations has picked up as well.
Another encouraging sign, Ware said, is that lending activity has steadily increased since the third quarter of 2009. At that time, the value of loans to truckers was down 28 percent from the third quarter of 2008, when the financial crisis hit. The level of decline decreased in the fourth quarter of 2009, however, when the value of loans to trucking companies was only down by eight percent from the fourth quarter of 2008.
The first quarter results build on these positive trends, Ware said, and bode well both for the second quarter and for the rest of the year. Ware declined to be more specific about second-quarter loan activity, saying the firm doesn't yet have enough data to make a solid call.
The trucking industry in general, and smaller truckers in particular, has one of the highest loan default rates of any U.S. industry. However, Ware said that his company is projecting that default rates among the industries it tracks will be one-third less in 2010 than they were in 2009. Indeed, in March 2010 PayNet saw the biggest sequential drop in delinquency rates since the firm began keeping data in the 1990s.
Unlike other equipment types, truck power units are not purchased for future use. Instead, they are acquired to meet an immediate and evident need, namely the movement of goods. The elevated lending activity, especially among trucking firms that don't have massive capital to waste, reflects growing optimism in the economic and freight outlooks, according to Ware.