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.”
