As coronavirus grips economy, lenders offer some forgiveness for missed truck payments

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Updated Apr 7, 2020
If business slows down now or in the coming months, lenders have so far shown a willingness to negotiate payment extensions or new terms for financed equipment amid the global outbreak of the COVID-19 coronavirus.If business slows down now or in the coming months, lenders have so far shown a willingness to negotiate payment extensions or new terms for financed equipment amid the global outbreak of the COVID-19 coronavirus.

Owner-operators and small fleets with financed or leased equipment can likely land at least temporary relief from their monthly truck payments simply by contacting their lenders to work out a deal.

With the COVID-19 coronavirus outbreak suddenly tossing the global economy into an all-but-certain recession and some owner-operators already reporting loads drying up, lenders are willing to work with operators to delay payments for up to three months, sometimes without any penalties, so long as they call them.

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“We obviously have a large portfolio of long-haul transportation companies, and we’ve already had customers reaching out asking for extensions,” said Jason Spates, vice president of finance at TruckLendersUSA. The company is providing payment extensions of up to 90 days, free of charge, said Spates, “for anyone that calls in relation to COVID-19.”

“The important thing is you can’t wait until you’re behind and then try to negotiate,” said longtime owner-operator Gary Buchs. He retired this year but has started coaching other owner-operators and is active on Facebook with a group called Truckers Business Forum. “You don’t want to delay this. You want to get ahead of it,” he said.

Most clients of owner-operator financial services firm ATBS  are not yet struggling with revenue hits that are hurting their ability to keep up with truck payments, said Todd Amen, president of ATBS. But that likely will change in the next 30 days or so, he said.

“We have some drivers, for sure, that have struggled and are worried a bit, but most drivers are as busy as they can be,” he said. “They’ve got more freight than they know what to do with because everybody’s been buying 10 times more stuff than they need in the past few weeks.”

Operators will need to consider their long-term prospects more closely, he said. What happens to those having trouble servicing their truck payments will be partly determined by used truck values, as illustrated in trucking’s two most recent downturns, he said.

The Great Recession of 2008-2009 severely affected the whole economy. “Used truck values were pretty awful, so I think lenders were more willing to work to keep trucks out,” and adjust borrowers’ arrangements. During the milder freight recession of 2016-2017, used truck values were stronger. “I think lenders were less willing to defer payments because they could repossess the trucks and make money on them.”

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Rob Misheloff, president of finance brokerage Smarter Finance USA, notes the same. “Very few lenders are going to move to repossess right now. No. 1, because of the moral code of it and, two, who do you sell it to? In a time like this, asset prices are going to start to depress.”

His firm works with about 25 lenders, he said, and some of them have already reported that there’s no required approval process for truckers seeking payment relief for up to three months — all they need to do is call and arrange an extension.

Of their customers who’ve already called an asked for payment flexibility, Spates said, most work in either hospitality or in drayage at southern California ports.

“We’re encouraging customers to look for freight in areas that are supplying what’s in need,” he said. “Foods, dry goods, hospital support, contracts with the government,” especially the Federal Emergency Management Administration (FEMA), he said. Load opportunities may also be available, at least in the short-term, as retailers rush to restock after last week’s panic buy.

Amen also advises operators to take advantage of current conditions. “Get all the freight you can get your hands on,” Amen said. “Save as much money as you can,” with the consensus being loads will likely soon be much harder to come by.

The impact of the virus should peak in the United States between May and August, according to experts on a conference call Amen participated in Wednesday. That means the second quarter – April through June – will probably be the toughest for owner-operators, though hard times could easily persist through August, if not later.

Most lenders are willing to work with borrowers in a bind, especially those who’ve been good customers. Those in a lease-purchase agreement through a fleet should have the easiest time in changing finance terms.

“With a fleet lease-purchase, they know every week whether you’re getting paid,” and if you’re coming up short, the fleet can see why, Amen said. If the fleet is failing to provide enough miles, for example, they’ll do what they can to adjust the lease-purchase terms. “The last thing they want is to take the truck back.”