In a jarring report released last month, over 3,000 trucking companies filed for bankruptcy in 2020. To put that number in perspective, in 2019 when the trucking industry hit a slump in the aftermath of the threat of tariffs, the number of trucking companies that filed for bankruptcy was roughly 1,000. While there were some external influences that hit trucking companies particularly hard, there is a common thread that could have been rectified to mitigate the need for bankruptcies last year.
Bankruptcy Hit Big and Small Trucking Companies
While smaller trucking companies were impacted in a very big way during the COVID-19 pandemic, large carriers were not immune to economic slump that occurred around April of 2020. The initial wave of consumers “panic buying” toilet paper and non-perishable goods helped to tip the scales in favor of LTL trucking. In theory, this should have benefited the trucking industry as a whole, and it did in certain areas. The real downward pressure came when brick and mortar businesses started suspending activities and shuttering. Manufacturing slowed, and people were no longer going to stores, which meant that shippers didn’t have regular delivery jobs for carriers. The agile carriers switched to hauling for e-commerce shipments and LTL. Some even pivoted from large trucks to commercial vans, so they could offer last-mile delivery and get a foothold in that sector. The trucking companies that could not adjust or were heavily reliant on traditional hauling were hit by the economic downturn, regardless of size.
Cash Flow is the Key to Longevity
The common thread among trucking companies that filed for bankruptcy in 2020 was the inability to maintain cash flow. Carriers were waiting 30, 60, and even 90 days to receive payments from their customers. When April arrived, and trucking companies were still waiting on payments from jobs completed in the previous months, the only option seemed to be bankruptcy. If a client went out of business, that made the process of getting paid even more difficult for carriers. To ensure strong cash flow, trucking companies use freight bill factoring. Instead of waiting a month or longer to receive payment, trucking companies can use factoring to turn their unpaid receivables into cash. By maintaining cash flow and eliminating gaps in revenue, trucking companies of every size can weather economic downturns and avoid bankruptcy.
At Single Point Capital, we offer comprehensive factoring services to trucking companies nationwide. We will convert unpaid receivables into cash and make funds available within a single day to keep your company moving. Contact our offices today to get started.