The trucking industry has typically been considered high risk by lenders due to a number of factors, such as the fact that payments come in anywhere from 30-90 days after completion of the job and globalization issues. Lately, numerous additional factors, such as driver shortages, fuel cost increases, demand and lack of pricing power has only exacerbated this viewpoint. I’ve seen working capital lenders recently increase the amount of average monthly revenue they require by a factor of 4. In other words, where they would previously provide a working capital loan to a trucking outfit that generated $100K in monthly revenue, they have all of a sudden raised the bar to requiring $400K in monthly revenue, effectively rendering the majority of the small business trucking operators ineligible for working capital loans.
The other sector now facing similar challenges is the construction industry, for obvious reasons. Higher interest rates, labor shortages and supply chain issues have all combined to throw monkey wrenches in both residential and commercial starts. This isn’t all bad news, as the overinflated housing market is starting to cool off. For instance, in my DFW home area, average home prices are down 10% over the last several months. But I’m seeing ancillary players in the industry also being “redlined” for working capital loans. I recently had an established architectural firm subjected to the same increased monthly revenues requirements as I outlined above for the trucking firm, all because they are considered part of the construction industry.