Surviving the Great Freight Recession: Credit, capacity, and the road ahead

The U.S. trucking industry is weathering one of its most prolonged and painful downturns in recent history, which many are calling the “Great Freight Recession.” After a brief glimmer of hope earlier this year, the market has continued to weaken, with freight volumes, rates, and margins all under pressure. For lenders, operators, and investors, understanding the forces at play is fundamental to managing what may be the most challenging cycle in over a decade.

This article is Part 2 of our coverage of credit in trucking, based on webinars presented by Elliott Davis. Here, we explore freight demand and supply, credit access, short-term cash flow strategies, and actionable best practices for lenders.

For a more detailed look at the trucking industry risk profiles by segment, including local vs. long-haul carriers, read Part 1 published earlier this year.

Freight Demand and Revenues Sink

In 2024, the trucking industry moved 11.27 billion tons of freight, generating $906 billion in gross freight revenues. Despite these impressive figures, the sector continues to contract, and the downturn may deepen amid mounting economic pressures in construction, manufacturing, and retail—all exacerbated by ongoing tariff uncertainty.

While general retail remains relatively stable for now, this resilience is largely fueled by the spending power of the top 20% of earners. In contrast, construction is experiencing slower growth and a decline in total spending compared to last year. Meanwhile, manufacturing remains sluggish, with many industry leaders postponing investments and hiring due to persistent tariff policy ambiguity.

This cyclical decline has now entered its fourth year, with no clear bottom in sight. Spot rates are barely covering operating costs, and contract rates, once the gold standard for stability, are now often break-even at best.

Supply Is Slow to Adjust and Credit Is Tightening

Unlike demand, supply in trucking is slow to respond. Trucks must be ordered, financed, and built, making it difficult to scale down quickly. As a result, the industry is undergoing a painful correction.

Over the past two quarters, 41 freight carriers filed for bankruptcy, and repossessions are on the rise. The Fleet Capacity Index continues to contract, signaling that many operators are exiting the market or selling off equipment.

As cash flow deteriorates, access to capital becomes more constrained. Traditional lenders are pulling back, tightening advance rates on receivables and lowering loan-to-cost ratios on equipment. Even well-run fleets are struggling to meet stricter underwriting standards.

“I know good, strong companies that are doing all the right things and are making all the operational efficiencies that are feasible that don’t have that cash,” said Robby Philips, Vice President and Partner at TAG Truck Enterprises. “The right decision for them may be to upgrade equipment, [while] the right answer from the lending side is: ‘I need more cash.’ It’s tough.”

Factoring: A Lifeline with Limits

For some fleets, factoring (selling receivables to a third party) has become a necessary stopgap. While it provides immediate liquidity, it comes at a cost: fees, reduced margins, and a step removed from the customer relationship. In an environment where Net 90 payment terms are common, the ability to access cash in three days instead of 90 can mean the difference between making payroll or not.

However, factoring is far from a long-term solution. It doesn’t build equity, and it doesn’t solve the underlying issue of delayed cash flow and rising costs.

Equipment Decisions Are Getting Harder and Tariffs Aren’t Helping

Fleets are increasingly delaying truck replacements, a move that’s driving up maintenance costs and raising reliability concerns. Once a truck is out of warranty, the cost per mile to operate rises sharply. At the same time, the price of new trucks continues to climb, creating a difficult choice for both operators and lenders.

“For us to be able to value a remanufactured engine in an old model truck, […] it’s difficult,” noted Jim Mosby, Commercial Banking President at FirstBank. “If you’re trying to find collateral to lend against, although the trucking values have decreased, property throughout the U.S. has increased […] you can lend against the increased value of the real estate.”

Adding to the dilemma are tariffs, which remain one of the biggest obstacles to recovery. They’ve introduced a layer of uncertainty and instability at a time when the industry is already under pressure. Shippers are renegotiating contracts, manufacturers are unsure of their cost structures, and trucking companies are caught in the middle, forced to raise rates just to break even, while customers continue to push for lower prices.

What Lenders and Operators Can Do Now

Against a backdrop of compressed margins, tight credit, and regulatory uncertainty, both lenders and operators must take deliberate steps to protect financial stability and position for recovery. Consider the following best practices:

1. Segment Credit Strategies

Differentiate between local and long-haul carriers. Understand their cost structures, customer bases, and exposure to macroeconomic risks.

2. Stress-Test for Spot Rate Volatility

Build models that account for fluctuating diesel prices, driver turnover, and freight rate compression.

3. Evaluate Liquidity Options Carefully

Factoring may be necessary, but it should be paired with long-term financial planning and margin analysis.

4. Support Smarter Equipment Financing

Consider blended collateral strategies and flexible terms that reflect the realities of the current market.

5. Monitor Regulatory and Trade Developments

Tariffs, EPA mandates, and FMCSA rules will continue to shape the industry’s cost structure and recovery timeline.

We Can Help

While industry analysts are hopeful the sector will begin to stabilize sometime next year as supply and demand find equilibrium, the outlook remains uncertain. Until then, credit discipline, operational efficiency, and strategic capital access will be the keys to survival.

At Elliott Davis, we help financial institutions build better credit models, assess industry risk, and support lending strategies tailored to trucking. Download our PDF on the topic, watch the full webinar replay below, or contact our team today.

The information provided in this communication is of a general nature and should not be considered professional advice. You should not act upon the information provided without obtaining specific professional advice. The information above is subject to change.