No trucking company is an island
By Advance Business Capital
“It takes a lot to kill a trucking company,” observed David Bradley, president of the Canadian Trucking Alliance, speaking at a recent trucking forum in Toronto, Canada. “It’s amazing what people can do when they have to find increased efficiency and productivity to create that bottom line.”
Bradley is an ironically reluctant admirer of truckers’ stubborn survival. In his opinion the industry as a whole would be in better shape if more of the unfit had starved during Canada’s worst recession in sixty years. “We were hoping for the Great Cleansing to come and it didn’t happen.” In Bradley’s opinion, too many trucks are still chasing too little freight, continuing to drive rates downward.
The Great Freeze
If that’s the case, Bradley must be truly disappointed in George Anastasakos and Monty Carodonna, partners in Mike the Mover, an Ontario moving and storage business. Their 38-year-old company, one of the province’s largest movers, has fiercely clung to life despite two years of staggering losses. Give Anastasakos and Carodonna credit for holding on in hard times. In fact, we wouldn’t be writing about them now had their banker not decided to do just that. She gave them credit.
In ordinary times an enterprise with substantial assets and nearly four decades of uninterrupted profit wouldn’t have trouble getting money. The credit freeze changed all that. Fortunately it started to thaw just in time for Meridian Credit Union’s Michelle Avakian to take action, but more on that in a moment.
Hard Measures in Hard Times
Though Mike the Mover is a Canadian company, its recent history could be that of any similar American business. It could even be one with the exact same name; a quick web search reveals a “Mike the Mover” in Seattle, San Francisco, Chicago and at least a dozen other U.S. cities. If you’re named Mike and you’re in the moving business, that double “m” is apparently irresistible (even if—as with George and Monty—you’re not named Mike).
Anastasakos and Carodonna, who are boyhood friends, started their operation in 1972 with a single pickup truck. At their peak year in 2007 they had 18 trucks, 55 employees and an annual gross of $2.7 million. Then things went sour.
By June of 2008, the partners realized they wouldn’t top the previous year. By December they were looking at a 20% decline and their first-ever year in the red. In 2009 they began brutal cost cuts. They slashed the advertising budget, saved on insurance by taking vehicles out of service and reluctantly began lay-offs. By the end of the year, Mike the Mover had been reduced to 18 people and nine trucks. Despite belt-tightening, the company took a second yearly loss; sales were down a whopping 35%.
“Savior”
Nine months ago, the partners sought financial life-support from their local branch of Meridian Credit Union. Their longtime banker, Michelle Avakian, could easily have said no. The company’s business had badly deteriorated and they were already paying on one Meridian commercial loan. Fortunately Avakian was determined to help. “Instead of declining them,” she says, “we saw this as an opportunity to make a difference.”
Avakian switched Mike the Mover’s account from Meridian’s commercial lending division to its retail division, which offered more flexible borrowing strategies. She offered Anastasakos and Carodonna second mortgages on their homes, which would let the bank make a $400,000 loan, enough to pay off their existing loan and still have capital to keep the business running.
The partners agreed and Avakian expedited the process. They had their money in only two weeks. “She was our savior,” declares Carodonna.
The Great Thaw
Although Mike the Mover benefited from an involved loan officer, Meridian’s response reflects a subtle but definite easing of Canadian and American commercial credit. Bankers have always been hesitant in lending to trucking companies—smaller ones in particular—because they have one of the highest default rates of any industry, but in the last two years that caution has reached an almost paranoid paralysis.
Happily, the patient seems to be coming around. PayNet, which tracks lending activity in six industries, recently reported that in the first quarter of 2010 the dollar value of new loans to trucking companies rose 6%, the first year-over-year increase in transportation loans in nearly three years. That statistic is “very, very positive,” says PayNet president Bill Phelan. “Right now there’s more investment going into over-the-road trucking than there has been for several years.”
David Thomas, a senior vice-president with Bank of America, agrees. Speaking at the annual meeting for the National Tank Truck Carriers Association, Thomas said lending activity in trucking is picking up, particularly with more established businesses such as fleets, which should see “more aggressive pricing that will lead to better terms.”
Moral: Make a Case to Get a Loan
“The advantage of trucking is that it’s an essential industry,” says Thomas. “It can’t be outsourced.” However, borrowers still have to take care to make the best case possible. “Most of the time the person you’re talking to isn’t whoever will make the final decision, but they’ll make a case for you if you give them one.”
And thanks to Meridian’s Michelle Avakian, Mike the Mover is still doing business. Sales are up 28%. The partners have put three trucks back in service and rehired several people. George Anastasakos thinks they’ll break even this year. “The phone is ringing again. That’s good.”
This story was drawn from articles in Guelph Globe & Mail, Today's Trucking, DC Velocity and Transport Topics.
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