DESPITE tighter lending criteria, tank-trailer leasing companies say they have the capital to meet their needs.
Many banks adopted stricter lending criteria even though the federal government's Troubled Asset Relief Program (TARP) provided several major US banks hundreds of billions of dollars in an effort to spur more lending. According to the Federal Reserve's recent survey of US bank loan officers, more than 94% of respondents reported their banks' lending to businesses remained unchanged. This same survey found that banks tightened their lending criteria nearly every quarter over the past two years.
According to recent monthly surveys conducted by the National Federation of Independent Businesses (NFIB), fewer of its members actually sought credit in 2009 than two years ago. Those that did seek credit reportedly faced challenges. “Regular borrowers (accessing capital markets at least once a quarter) continued to report difficulties in arranging credit at the highest frequency since 1983,” according to the NFIB report summary.
Tank trailer leasing companies appear to have avoided the worst of the bank credit challenges, though. Several tank trailer leasing company executives describe how their firms dealt with the challenges.
“We have been fortunate since our inception to obtain competitive funding from our banks,” says Jim Buchanan of American Tank Leasing LLC, which is in its third year of business. “Even during the height of the recession, our banks were willing to work with us. We deal with mostly smaller, community-based banks for financing and have found that they are far more flexible. We meet regularly to discuss opportunities for American Tank Leasing, and our banks work with us to provide the best possible financing to meet our specific needs.”
Ralph Nappi Jr of Transport Resources Inc, says: “We have a long history with several lenders and a strong cash position. Our lenders understand the collateral. It's not difficult. I don't have an unlimited universe, but I have two or three people I can put up against each other, so I can come up with something reasonably competitive. The fact that I can get access to it at all is key right now.”
Bob Baker of Semo Tank/Baker Equipment Co says although funding has become more of a challenge over the past two years, the company maintains a line of credit vendors that have remained loyal to the company and its customers' needs.
“We have been fortunate to have developed relationships with these competitive funding groups, which truly understand the transportation business and are very comfortable with limited risk in the tank-trailer market,” he says. “Quite frankly, we are contacted very frequently by other sources offering funding. However, if they do not have some background in transportation, they're reluctant to offer competitive rates. They offer a lot of ‘blow-and-go’ on the front side, but not much of substance when it comes down to the final deal.”
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Buchanan says American Tank Leasing's main focus is the tank trailer user end of the business, whether it's a trucking company with equipment needs or a chemical plant looking for storage alternatives. But because American Tank Leasing is not quite as big as its competitors, it is able to be more flexible with the customer.
“We offer both long- and short-term leasing and can do it at a very competitive rate because we don't have all of the overhead a larger company has,” he says. “Our customers know when they call us they are going to get straight answers and the assistance they need to meet their tank trailer needs.”
Buchanan adds that customers are more likely to lease due to the fact that they are unwilling to commit to long-term contracts.
“The volatility of the economy has made many companies more conscious of carrying long-term debt,” he says. “There is a lot of inventory available in the industry, but if it isn't the right type of equipment, customers will turn to us to meet their needs.
“Since the beginning of the year, we have seen an increase in requests for equipment used in the specialty chemical market. The standard DOT407 tank trailer demand has still not come back from its height 14 months ago, but DOT412 and lined tank trailer demand is picking up.”
He says the year started out slow — at around 80% utilization — but February and the beginning of March have been good, taking utilization to around 90%.
“Although it has been a lot of short-term leasing, every lease counts, which is where we separate ourselves from our competitors,” he said. “We are willing to service the customer in every way possible. Whether it be short term or long term, we can accommodate their needs.”
Jim Rogers, Matlack Leasing Inc, says a high percentage of the DOT407 standard 7,000-gallon trailers has remained in service with lease customers.
“Specialized equipment has certainly stayed out,” he said. “When you get specialized trailers, sometimes that's a longer term lease in nature. Business has been soft across the whole industry for 18-24 months. Customers are leasing because new equipment is getting more expensive. A lot of carriers are not sure how long they're going to keep a piece of business they are awarded from a shipper and a bit reluctant to make a commitment to buy a $50,000 to $60,000 trailer. They're not sure they will have it for a long enough period of time.”
He says inventory is good.
“We always keep an ample supply of new and existing tanks on the ground, so we're in good shape right now,” he says. “We're on a regular purchasing plan of new equipment, so we always have new equipment at the factory.
“We're upbeat on the industry. We continue to purchase trailers. We have some being built for us now. We're hoping the economy turns around and our customers will allow us to grow with them.”