Bank for Truckers launches fintech with Rebrand – Sourcing Journal

There is no independent contractor along the supply chain that faces more complications in getting paid and paying expenses than the truck driver. Alone, all day and night along America’s highways and byways, most of these vital cogs in the logistics wheel don’t even have so much as a bookkeeper. So Aaron Graft figured he’d do them one better—he’d create a bank for truckers.

Last week, Graft and his team were in New York to ring the closing bell at NASDAQ for the second time, this time to celebrate the rebranding of Triumph Bancorp as Triumph Financial, emphasizing a move toward fintech, while the old brand continues to serve daily needs of more than 12,000 truck drivers coast-to-coast.

Graft explains that Triumph buys invoices from everyone a trucker passes to and fro, including dealers, shippers, manufacturers and freight brokers, allowing the Dallas-based brand to act as both payer and payee for its $24 billion-a-year customers .

“We were an entrepreneurial business that became a bank — which was never my intention,” Graft said. “And we now beat more truckers than anyone else in the world – which was not my intention either.”

For Graft, his entrepreneurial adventure began in 2006 when he had his sights set on getting out of the legal profession to start a business buying distressed loans. Then came the great crash of 2008, and overnight almost every loan became an emergency loan.

“The contrarian in me says if everyone is terrified, where’s the place to go? Banking,” Graft said. “Every week we were looking at Wachovia, then Lehman Brothers went down, so I bought this little bank for 20 cents on the dollar; probably still paid too much given the risk. We cleaned up and just through a chance meeting I was exposed to transportation. That’s when I realized that nobody in the banking industry was thinking about banking for truck drivers.”

At first he was opposed by those in the established banking world.

“It might have been a stretch to take a niche and let it be half our balance sheet, but we said, you know what, let’s embrace that we’re a bank for truckers,” said the native of tiny Clinton, OK, who has reaching a net worth of more than $27 million. “People in banking said, no, that’s what a community bank should look like — you wear a lapel pin and go to the country club and lend money to rich people. It’s fine, it can work, it’s just not very exciting.”

Graft does not appear to be the first to operate as a bank on behalf of truckers, and there are others who have jumped into waters that remain shallow, he says, based on a high barrier to entry and an ongoing skepticism in the banking industry , 14 since Triumph’s launch.

“At first there was skepticism, being new to banking and having turned around a failing bank, and skepticism that you still have to get FDIC ‘no-objection’ to move into a new industry,” Graft said. “There was a lot of skepticism from entrenched bankers to go into the business of semi-solvent truckers. It’s the antithesis of what most bankers think. Fortunately, we put together a really thoughtful analysis and explained to them that the credit risk isn’t really the trucker; the credit risk is Anheuser Busch or Caterpillar or Polo or whoever they will have.”

That is not to say that there are no risks associated with truck drivers.

“The trucker is a fraud risk,” Graft said. “You have to make sure that the invoice is legal and that you’re invoicing from whoever is procuring the capacity … and we have predictive analytics that can figure that out. Once they understood that, and looked at the risk on two different fronts, they became comfortable with it.”

Graft describes the business of making money through a bank for truckers as “a grind.”

“We buy a billion dollars of invoices a month, $2,000 at a time, $25,000 a day, and we collect it every 30 days,” he said. “When we brought it like that to regulators, they approved it, even when it was 1/25 the size it is now.”

Graft says truckers have traditionally been exploited along the supply chain, and his bank helps protect them from “factoring,” the practice of drivers giving up a percentage of the invoice for processing.

“We take the position that factoring was payday loans for truck drivers. It took advantage of people by charging 25 to 40 aprs,” Graft said. “The other side would have said ‘we charge 4 percent to do the invoice and all the back office for this truck driver, but multiply that by 12 (months) and it’s 48 percent APR, which is still very expensive. Using our scale and technology, we charge 1.4 percent on an invoice—higher for a smaller fleet, lower for a large one. People ask, ‘Is factoring fair to truckers?’ and to that I say, ‘well, is Visa fair to Walmart? Of course it is. Visa charges 2 percent for every swipe, and we charge less than Visa for everything we buy.'”

Even as Triumph rebrands and expands, Graft said 2023 does not appear to be a banner year for truck drivers.

“They say the worst time to start a business is in the best of times, and a lot of small trucking companies started in 2021-22. Guys could get a driver’s license and hear about buddies making $150,000-$200,000 a year, but that world has changed ,” Graft said. “Truck transport is very cyclical. Usually we see a ‘Santa meeting’ in shipping and we see it because we touch 75,000 invoices a day and this is the first time I haven’t seen a real Santa meeting.”

Graft does not believe an ongoing removal of the inventory glut that continued to plague companies through 2022 will help significantly.

“Inventories are still high, but that probably means in the first quarter a lot of smaller trucking companies will wash out,” he said. “And like all cyclical things, there will be a capitulation mode and people will think it will never come back, but in the third quarter of next year, because you have that capacity leaving the system, I think people will find that the world really didn’t end and you end up with 5, 6, 7 percent interest. Freight will tighten up again because you will lose capacity.”

Graft said the demographics of the standard truck driver have changed since he found himself in the industry unexpectedly 14 years ago. Routes are centered, more or less, on three major hubs with defined sets of drivers.

“Laredo (Texas) is the largest inland import point in the United States with 18,000 trucks daily crossing the bridge and 90 percent of those drivers are Hispanic and speak Spanish,” Graft said. “The other is Chicago, which has the largest Polish population outside of Poland, and there are Serbs and Macedonians and others who have truckloads from Eastern Europe. On the West Coast, Sikh Indians have established themselves by working together.”

This radical change from the stereotypical American truck driver has seen Triumph become fluent in at least a dozen languages.

“They all speak English, too, but we like to meet them where they are,” Graft said. “That’s where the growth comes from new entrants into the trucking business. The White, Bubba trucker from the 1980s from the Burt Reynolds movies doesn’t exist.”

Graft said that of the 250,000 active trucking companies, 96 percent of them have four trucks or less, and their banking needs are as great as ever.

“Truckers are the least sophisticated, least capitalized party in the entire value chain,” he said. “Goods come from the ship to the rail to the intermodal yard where this guy picks it up, and it’s the first time since it left the factory that it’s in the hands of somebody making $70,000 with no safety net. They’re the ones who have to put costs before they get paid, so there is a huge need for them to be current in the cash flows.”