Estimates Show Nearly Half of Smaller Carriers Applied for PPP Loans

US shipment volumes were down 22.7 percent and 23.6 percent year over year in April and May, respectively, although they rose 1.6 percent in May from April, according to the Cass Freight Shipments Index. Over the past 10 years, the Cass Freight Shipments Index historically has risen in the spring and then dropped in July, after Independence Day, before rising again in August or September. That was true even in strong years such as 2018, when the index peaked in May before dropping sequentially in June, July, and August. There may be a similar freight gap in 2020.

That will make July and August difficult months for small trucking companies, unless they are hauling goods already deemed essential. "The level of uncertainty around trucking in the coming months and years is astronomically high," said Jeff Tucker, CEO of third-party logistics company Tucker Company Worldwide. Much of that uncertainty turns on how quickly unemployed workers are rehired, he said. High unemployment "spells a lot less freight moving and hard times ahead in transportation."

Tucker remains optimistic that freight volumes will increase sequentially this year, as more companies push to reopen or restart stalled business. "We've seen improvements in business over the last two weeks," he said. Freight volumes may still be down by double-digits year over year, but a sequential uptick month by month would keep more truckers on the road.

Those relying solely on the spot market to find loads or hauling freight that is in less demand during the recession, are likely to struggle, with more trucks available to haul less freight. Those are the small trucking companies that would benefit most from a PPP loan, which can be used for payroll and other purposes over a 24-week period - approximately six months.

How many small trucking firms have actually taken advantage of the PPP loan program? The answer may be not as many as you would think. The amount of PPP loans small trucking firms are receiving may be overestimated by those who believe PPP funds are the one thing standing between US shippers and a capacity crunch this fall.

The US Small Business Administration, which oversees the PPP, tracks loans by North American Industry Classification System (NAICS) codes, a classification system created by the US, Canada, and Mexico and introduced in 1997. NAICS groups several transportation-related sub-sectors under the rubric of "transportation and warehousing," or NAICS 48-49.

As of June 12, transportation and warehousing firms as defined by NAICS have received 161,794 PPP loans with a total value of $16.4 billion. That's approximately 3.2 percent of the total amount disbursed by lenders under the PPP. The NAICS data include 298,622 transportation and warehousing firms, according to the US Bureau of Labor Statistics.

If each loan went to an individual company, that would suggest approximately 54 percent of transportation and warehousing firms have received PPP loans. But the transportation and warehousing category includes airlines, railroads, inland waterways operators, passenger bus lines, logistics and warehousing companies, as well as trucking companies.

A May survey by Overdrive magazine found 51 percent of small carriers and owner-operators had not applied for a PPP loan, and only 14 percent had applied and been approved at that time. Another 26 percent had applied for a loan but not yet heard whether the application was approved, and 8 percent said their application had been declined by their lender.

It's not clear why more small trucking firms have not applied for or received PPP loans. Some companies may not have been eligible because of the way they pay drivers - companies using 1099 contractors rather than W-2 employees aren't eligible for PPP payroll funds. However, since April 10, those 1099 workers can apply for their own PPP loan as a business.

Loan applications and then applications for forgiveness of the loan were complex, as well. The SBA introduced simplified loan forgiveness application forms June 16, requiring less documentation. The Payroll Protection Program Flexibility Act, which took effect June 5, also expanded the length of maturity for the loans and provided more favorable terms.

Small trucking companies have until June 30 to apply for PPP loans from the US government. As of June 12, $129.8 billion in PPP funding - much of which will be forgivable, if applied to payroll - remained to be claimed. Approximately $512.3 billion in PPP loans had been awarded by June 12, the latest date for which data are available.

Source: Journal of Commerce