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Bank for Truckers: An Idea Once Scoffed at Finds Success

There is no independent contractor along the supply chain who faces more complications in getting paid and paying expenses than the trucker. Alone, all day and night along the highways and byways of America, 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 a second time, this time to celebrate the rebranding of Triumph Bancorp as Triumph Financial, emphasizing a move toward fintech, while the legacy brand continues to serve the day to day needs of more than 12,000 truckers coast-to-coast.

Graft explains that Triumph buys invoices from everyone a trucker hauls to and fro, including retailers, shippers, manufacturers and freight brokers, allowing the Dallas-based brand to work as both a payor and payee for its clients to the tune of $24 billion per year.

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

For Graft, his entrepreneurial adventure began in 2006 when he had eyes on getting out of the legal profession to set up a business buying distressed loans. Then, the great calamity of 2008 arrived and, overnight, just about every loan became a distressed loan.

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“The contrarian in me says if everyone is terrified, where is the place to go? Banking,” Graft said. “Every week we were watching Wachovia, then Lehman Brothers go down, so I bought this little bank for 20 cents on the dollar; was probably still paying too much given the risk. We cleaned it up and only through a fortuitous meeting was I exposed to transport. That’s when I realized no one in the banking industry thought about doing banking for truckers.”

Triumph Financial CEO Aaron Graft at NASDAQ in New York on Dec. 20.
Photography courtesy of Nasdaq, Inc.

At first, he got resistance from those in the established banking world.

“That may 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 now has a net worth of more than $27 million. “People in banking were saying, no, this is what a community bank should look like—you wear a lapel pin and go to the country club and lend money to rich people. That’s fine, it can work, it’s just not very exciting.”

Graft doesn’t portend to be the first to operate like 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 years since Triumph’s launch.

“At first, there was skepticism, being new to banking and having turned around a failing bank, and skepticism in that you still have to get FDIC ‘non-objection’ moving into a new line of business,” Graft said. “There was high skepticism from entrenched bankers about moving into the business of semi-solvent truckers. That’s the antithesis of what most bankers think. Thankfully, we put together a really thoughtful analysis and explained to them that the credit risk really is not the trucker; the credit risk is Anheuser Busch or Caterpillar or Polo or whomever they’re hauling for.”

That’s not to say there isn’t risk associated with the truckers.

“The trucker is a fraud risk,” Graft said. “You have to make sure the invoice is legit and you’re invoicing from whomever procures the capacity…and we have predictive analytics that can figure that out. Once they understood that, looking at the risk on two different fronts, they got 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. “Once we framed it like that for regulators, they approved it, even when it was 1/25 the size it is now.”

Graft says truckers have traditionally been taken advantage of along the supply chain, and his bank helps protect them against ‘factoring,’ the practice of drivers surrendering a percentage of their invoice for processing.

“We take the position that factoring was payday lending for truckers. It took advantage of people by charging 25 to 40 APRs,” Graft said. “The other side would’ve said ‘we’re charging 4 percent doing the invoice and the whole back office for this trucker, but multiply that by 12 (months) and that’s 48 percent APR, which is still very expensive. Using our scale and technology, we charge 1.4 percent blended on an invoice—higher for a smaller fleet, lower for large. People ask, ‘is factoring fair for truckers?’ and to that, I say, ‘well, is Visa fair for 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 figure to be a banner year for truck drivers.

“They say the worst time to start a business is during the best of times and a lot of small truck companies started in 2021-22. Guys could get a motorcarrier license, hearing about buddies making $150,000-$200,000 a year, but that world has changed,” Graft said. “Trucking is very cyclical. Generally, we see a ‘Santa Claus’ rally in freight and we see it because we touch 75,000 invoices a day and this is the first time I haven’t seen a true Santa Claus rally.”

Graft doesn’t believe an ongoing clearing out of the inventory glut that continued to plague businesses through 2022 will help substantially.

“Inventories remain high but what that probably means is in the first quarter a lot of smaller truck companies will wash out,” he said. “And like all cyclical things there will be a capitulation mode and people will think it’s never coming back, but in the third quarter of next year, because you have that capacity leave the system, my guess people will find the world really didn’t end and you’ll end up with 5, 6, 7 percent interest rates. Freight will tighten up again because you will lose capacity.”

Graft said the demographic of the standard truck driver has changed since he found himself in the business unexpectedly 14 years ago. Routes center, more or less, on three major hubs with defined sets of drivers.

Laredo (Texas) is the largest inland import spot in the U.S. with 18,000 trucks a day coming across the bridge and 90 percent of those drivers are Hispanic and speak Spanish,” Graft said. “Second is Chicago, which has the largest Polish population outside of Poland and there are Serbs and Macedonians and others have truck dispatch from Eastern Europe. On the West Coast, Sikh Indians have established themselves by working collectively together.”

A truck makes its way down I-35 coming from the World Trade Bridge in Laredo, Texas on Wednesday, April 5, 2017. Getty Images

This radical change from the stereotypical American trucker has prompted Triumph to become 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 is coming of new entrants into the trucking business. The White, Bubba trucker from the 1980s from Burt Reynolds movies doesn’t exist.”

Graft said 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 railroad to the intermodal yard where this guy picks it up, and it’s the first time since it left the factory it’s in the hands of someone who makes $70,000 with no safety net. They’re the ones who have to put forth cost before they get paid, so there is a tremendous need for them to have timeliness in cash flows.”