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Everything You Need to Know About the Fiscal 2021 Transportation Funding Bill

At the end of July, the U.S. House of Representatives passed a package of fiscal year appropriations bills for 2021 with a 217 to 197 vote. The six bills address urgent national priorities and supply funding for federal agencies, including the departments of Commerce, Defense, Energy, Education, Health and Human Services, Housing and Urban Development, Justice, Treasury Labor, and Transportation. The $1.3 trillion bill package still needs to survive the Senate, but the overall goal is to provide funding for “96% of the government for the fiscal year 2021.”

The portion of the package for the Department of Transportation includes a request for a $107.2 billion budget for 2021. This amount will be broken down and allocated to various sub-departments within the DoT. In this article, we’ll go over what you can expect to see in 2021 if the bill passes through the Senate and how it will affect the trucking industry.

DoT Bill Breakdown

For the 2021 fiscal year, the DoT would be allotted $21.1 billion more than it received in 2020.

If the bill passes in the Senate, it will include:

  • $62.9 billion for the Federal Highway Administration
  • $18.1 billion for the Federal Aviation Administration
  • $1.3 billion for the National Highway Transportation Safety Administration
  • $3 billion for the Federal Railroad Administration
  • $18.9 billion for the Federal Transit Administration
  • $1.2 billion for the Maritime Administration

Aside from the $107.2 billion budget, the Department of Transportation hopes to receive an additional $26 billion “to strengthen and make more resilient our nation’s aging infrastructure” in light of the current economic climate. This amount would include National Infrastructure Investments and a budget for the DOT Office of Inspector General, to name just a couple.

To see the budget highlights in its entirety, click here.

What This Means for the Trucking Industry

The trucking industry is rapidly expanding, and there has been an extensive amount of care when it comes to growing and improving the trade. Earlier this year, the DoT announced its plans to add more upgraded truck stops across the nation. And while this may feel like a minor change, it will ultimately provide comfort and be a convenient perk for truckers conquering longer hauls.

The 2021 budget for the DoT would also be used to expand and rehabilitate the communities that serve the trucking industry. House Appropriations Subcommittee on Transportation, Housing and Urban Development, and Related Agencies Chairman David Price said:

“Our nation is facing an infrastructure crisis, with crumbling roads, aging transit and rail systems… Meanwhile, COVID-19 is ravaging communities, revealing and deepening existing disparities… [This bill] continues to build on bipartisan progress in recent fiscal years to increase funding for all modes of transportation—highways, aviation, transit, bike and pedestrian projects, rail, and ports—while improving safety and focusing on resiliency across all programs.”

As mentioned above, a significant plan for improvement is constructing and reconstructing infrastructures. Improving infrastructure in rural areas (where a majority of trucking fatalities occur) can lead to a safer work environment. Bettering foundations in urban areas also has its benefits. It could ultimately lead to less work-based hazards, reduced traffic, and fewer accidents, which leads to greater efficiency and steady economic growth. The increased funding for state and local governments also allows them to improve their local transportation systems and safety; this could boost public relations and enable lower-income communities to rehabilitate their areas. These changes will culminate in growing our nation’s communities and paving the way for more trucking companies to open up, create more jobs, and expand our nation’s economy.

What Can We Anticipate For 2021?

As of right now, the bill isn’t officially passed, and therefore we cannot say for sure what is to come, especially in light of COVID-19. The energy surrounding this bill is hopeful, though. House Appropriations Committee Chairwoman Nita M. Lowey said:

“This bill represents a forward-looking vision to rebuild our nation and strengthen our communities. Together, we can modernize our transportation systems, expand access to safe, affordable housing, and support our most vulnerable neighbors… With this bill, we are laying the foundations for sustained economic growth and expanded opportunity for every American in every corner of our nation.”

If the Senate passes the bill, you can anticipate positive actions for not only the trucking industry but the communities that benefit from it as well. Check out our blog to stay up-to-date on the latest developments for this story. If you want to kickstart your trucking career, contact us today to see how we can help you.

Pros and Cons of Employer-Paid CDL Training

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Believe it or not, it’s both legal and entirely feasible for anyone in the U.S. to receive a Class A Commercial Driver’s License without any help from a private trucking school. This information can be hard to come by, however, as there are dozens of private trucking schools in most states who make a profit by convincing greenhorns the best way into trucking is through their particular programs.

What You Need to Get a CDL

That being said, there’s a lot of information and many steps required for anyone looking to acquire a CDL. As a result, going the lone-wolf route might not be in the best interest of someone looking for step-by-step assistance. If you’re attempting to get the license alone, you’ll have to do a great deal of research in order to learn what’s needed to pass the written test and then pass the truck inspection that’s required for acquiring a CDL in most states, which can be a challenge for some. The process of obtaining a CDL shares similarity with the process of attaining a regular driver’s license, with different requirements to qualify. Federal regulations require you to be at least 18 years of age before attaining a CDL. But, in order to drive a commercial vehicle across state lines (interstate travel), or haul hazardous materials (HazMat), federal regulations require you to be 21 years of age. To apply for a CDL, you must have a Social Security number assigned to you to verify your citizenship, a conventional driver’s license from your local Department of Motor Vehicles, one year of driving experience, and a good driving record.

Depending on the state where you’ll apply for your CDL, it’s possible your DMV has already published a guide to getting your CDL, like this one created by the state of Texas. Make sure to check your DMV web page concerning CDLs to see if it’s published a similar resource for your state.

To make a long story short, the cheapest way to get your CDL will always be to do it yourself, without putting money down on a private program. On the other hand, there are still potential benefits to the other two options available to new drivers, which are to: 1) Attend a private CDL training program, or 2) Participate in Employer-Paid CDL Training.

The Potential Benefits of Private CDL Training Programs

Many CDL training programs have connections in place that can make it easier for recent graduates of the program to get jobs with carriers. There’s also a very high demand for truck drivers in most states, so most individuals who receive a CDL shouldn’t have too much trouble finding employment in general. With that in mind, tuition for driving school can range from $3,000 to $6,000, making it a significantly larger investment than applying for a CDL on your own, and the most expensive way to get into trucking on average. While many students find it relatively easy to get student loans for their CDL program, interest rates in America have been on the rise in recent years, making private programs a pretty large price to pay for the convenience.

Employer-Paid CDL Training

These programs are more difficult to generalize about, as they’re slightly less well-regulated when compared to true-to-form private driving schools and can differ widely when it comes to day-to-day life in training. While you won’t have to put any money down up front in order to get your CDL, in most cases, receiving training from an employer comes with a requirement that you work for that same company for a minimum amount of time, and being terminated from that position or accepting another can come with financial penalties. If you begin, and then fail to complete Employer-Paid CDL training, it’s likely you’ll have to pay whatever amount that company values the cost of training.

The long and short of this is Employer-Paid CDL training can be an inexpensive and efficient way to get into trucking, but it also carries a great deal of risk. Prime Inc. is a huge trucking company in America that trains thousands of drivers every year; recently, it had to pay $28 million to drivers who participated in their paid apprenticeship program as a result of unfair underpayment to new graduates of their program.

Lawsuits like this aren’t overwhelmingly common, but participating in Employer-Paid CDL training programs inherently gives a lot of power to the employer and can make it difficult for new drivers to have a good understanding of what employment could look like with other companies, essentially reducing their access to the financial cushion afforded by the free market. In general, if you’re seriously considering Employer-Paid CDL training, it’s highly advised that you get a hold of someone who’s participated in that same program before you enroll.

How You Can Get Started

If you need private financing for a truck after you’ve finished your CDL program, consider contacting us at Mission Financial, where we can offer you a direct loan at a competitive rate. Make sure to visit our blog to keep up with recent trucking news as well.

Tax Update for Owner Operators and Fleet Owners

IRS Brings Back Form 1099-NEC

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The IRS form known as 1099-NEC is returning for the 2020 tax year. The 1099 form has been in use for a long time—it’s the tax form used for independent contractors to report their taxable income. The NEC variant hasn’t always been in use, however, as it was replaced in the early 1980s by an updated, more robust version of 1099 MISC. This year, the form you’ll use to report information about your income as an independent contractor has changed. In this article we’ll describe why that is and what you need to know to be prepared. Filing taxes correctly can save you a lot of time, money, and headache—so make sure to do your due diligence and brush up on what’s new for 2020, and read our other tips for trucking success once you’ve made a plan for this tax season.

Supposedly, the revival of this tax form is in response to the Protecting Americans from Tax Hikes Act of 2015 (PATH Act), which now requires businesses to file new information returns that are specific to their 1099 (aka non-employee) workers by January 31 of each year. The PATH Act created new problems with the IRS and its ability to process data, because the due date for 1099-MISC forms those same workers would have to file wouldn’t be due until March 31. In order to skirt this issue, the new version of 1099-NEC, available on the IRS website, contains a new box for indicating non-employee compensation (NEC). Note, the 1099-NEC form isn’t replacing 1099-MISC. Rather, it’s a supplemental form that deals with NEC. As we’ll explain later, 1099-MISC is used to report many different types of miscellaneous income, and for that reason, it still remains in use for employers, businesses, and non-employed contractors alike.

How This Affects Fleet Owners and Drivers

If you work for a fleet or are a fleet owner yourself, it’s important to acknowledge this change. If you’re an operator, this will be the form you’ll have to fill out and supply to both the government and your contract supplier, which is slightly different from the 1099-MISC you’ve likely filled out in previous years and will have to fill out again this year. If you’re a fleet owner, this will be the form you’ll have to issue to your independent contractors in 2020.

Form 1099-MISC, which most seasoned owner/operators should be familiar with, is what’s called an information return businesses of all kinds use to report payments to outside independent contractors. This form is also used for other types of income payments like royalties and rent payments, which only applies to certain types of businesses. Any contractor who makes more than $600 from one particular source will receive a 1099-MISC from that source. For the most part, the 1099-MISC is filled out a lot like form W-2, except it has extra boxes for giving information about non-employed contractors.

The 1099-MISC form is an information return used to report types of payments made to independent contractors. Payments included can come in the form of royalties and rents as well, but for most O/Os, this form will be used to assess what you owe based on what outside businesses paid you during the last fiscal year.

Here’s a full list of income types that can be reported on a 1099-MISC:

  • Royalties
  • Rent
  • Fishing boat proceeds
  • Medical and health care payments
  • Substitute payments in lieu of dividends or interest
  • Crop insurance proceeds
  • Excess golden parachute payments
  • Gross proceeds paid to an attorney

So, What Do You Report on 1099-NEC?

1099-NEC is for reporting non-employee compensation. These include the following taxable payment types to independent contractors: fees, commissions, prizes, awards, and other forms of potentially non-monetary forms of compensation for services rendered. For every 1099-NEC, there are multiple copies that need to be sent to the proper parties.

Use this checklist to make sure your 1099-NEC copies get sent to the proper places:

  • Copy A: Send this copy to the IRS
  • Copy 1: Send to your state tax department, if your state collects income tax
  • Copy B: Send to your independent contractor
  • Copy 2: Send this copy of the state return to your Independent contractor
  • Copy C: To be kept for your business records

Have More Questions about Taxes?

Taxes can be difficult to manage, which is why we make a point to keep our readers updated on the latest changes to tax code and different financial strategies for owner/operators. If you’re interested in what truckers have been doing to find enough capital to stay afloat during the coronavirus pandemic, read our blog on short-term financing. Keep up to date on the state of trucking in America by reading our posts on supply chain and employment topics, which you can find here. If you’re new to trucking, and want to get started with your own fleet or your own rig, contact us with any questions you might have and we can help you get started in a brand new career.

An Owner/Operator’s Guide to Financing During a Pandemic

A lot of things are up in the air in light of the COVID-19 pandemic. If your business had just decided to put money down on future investments, or didn’t have much squirreled away to begin with, it can be difficult to trust the market to keep your business going steady—no matter if you’re an independent O/O or a fleet owner.

A survey Overdrive sent out in May found that their readers’ number one concern was freight pricing. Their second biggest concern? Cash flow.

These issues are pretty severely entangled with one other. Recently, we’ve seen some owner/operators in the perfect positions, geographically, start making money hand over fist, whereas other O/Os (only a couple thousand miles away) lost money every day driving half-full or even totally empty trucks. While there is some strategy available to maximize your business success during this uncertain time in freight, there are some problems that won’t budge without a heap of capital behind them.

Below, read our guide on the best ways to find financing during the pandemic.

Start with a PPP Loan If You’re Eligible

Paycheck Protection Program loans from the government’s Small Business Administration are, hands down, one of the most cost-effective ways to finance your business. These loans are designed to help small businesses pay their employees while the economy is slowed due to the coronavirus. As long as you do the proper research and only spend PPP loan funds on designated expenditures, your loan will be entirely forgiven once the term ends.

Unfortunately, these loans don’t always have the best legs. For some employers, a PPP loan will make sure you and your employees keep getting paid, but only for a time period of two to three months. But if your business hasn’t picked back up by that time, what will you do?

Research Private Lenders

If you haven’t been able to get a hold of a PPP loan, or you’re worried about what will happen once that loan runs out, it’s time to start researching and comparing private lenders. Financing is an important part of the job as an independent owner/operator, fleet manager, or truck dealership.

Most people won’t have $40,000 to $100,000 lying around to purchase a new rig for their business outright, and dealerships will always need large amounts of capital to meet the fluctuating demand for different semi tractor-trailer models. As a result, financing purchases has become the norm for O/Os and dealerships alike. While it can be more difficult to find favorable options as a dealership owner, there are plenty of options available to someone looking for private financing for a dealership.

Keep Your Eyes Open for Bad Deals

When financing a new truck, it’s crucial to take the process slowly and read all of the literature given to you by the lender. For the most part, your options as a future owner/operator include either taking an upfront traditional loan to finance your truck, or you can lease a truck for a certain period of time. Often, the comparison between these two options can be where a bad faith lender will try to take advantage of truckers new to the game—so it’s especially important to research which of those options best suits your lifestyle before you ask for cash.

Long leases will generally be more expensive in total than conventional loans, and they’ll leave you with no property to sell at the end of the deal to help recoup what you’ve paid. But if you’re worried about the market or expect to spend only a fixed amount of time in trucking, leasing your truck has the potential to be the most cost-effective option.

If You’re Buying, Save as Much as You Can Ahead of Time

The logic here is simple: Any money you can put down on your truck on Day 1 is money you don’t have to pay interest on. In addition to your credit history, having a large amount of capital on hand can act as collateral and help you get the best possible loan package. Plus, truck costs won’t quit once you’ve got your truck all to yourself. The first months with a new truck will inevitably be filled with small optimizations—technology changes, small additions, and the occasional stylistic upgrade. In order to make your truck the most comfortable and efficient it can be, you’ll need some cash set aside.

Contact a Lender You Can Trust

Always choose a lender with a long history in the business. Mission Financial has been providing truck financing for decades to owner/operators, dealership owners, and even capital to help keep your commercial fleet up and running. Contact us if you still have questions about the best ways to stay afloat throughout the coronavirus pandemic.

How the Freight Industry Is Rebounding in the Wake of the Recession

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The American economy took a serious hit in March, April, and May of this year, with unemployment spiking at nearly 15%. This percentage of people left without full employment in America was so large, you’d have to go back 80 years to find a comparable moment of economic strife. Much of the spike is attributed to the coronavirus pandemic, a serious public health crisis that required many industries to slow down or cease operations completely in order to prevent a widespread infection.

Luckily, there’s been good news on the job front. As of early July, unemployment decreased to 11%, indicating roughly 4.8 million people returned to work since the coronavirus pandemic began. This brings the rate of unemployment back in line with some more relatable markers in American history, not too long ago. The recessions of 1983 and 2009 both yielded unemployment rates of roughly 10%, which gives Americans who have lived through past economic downturns a small indication of how things might progress in America moving forward.

Employment in the Freight Industry

Trucking in America has gotten a lot of positive attention from the federal government from the very beginning of the pandemic. Truckers were declared essential workers by the White House with little delay. This kept owner/operators’ jobs secure, to some degree, but also created new challenges for workers in an industry becoming more isolated by the day—with truck stops and highway restaurants shutting down left and right due to the pandemic and necessary practice of social distancing.

The following months were a mixed bag for O/Os, with notable difficulties for freight owners and logistics companies. The American supply chain became severely lopsided overnight, with demand for medical supplies and food products spiking in urban areas, causing full truckloads to enter metropolitan areas at an increased rate, only to find there wasn’t anything to fill their trucks with on the way back out to a factory or distribution center (and we all know how fast you bleed money driving an empty semi-truck). This caused per-mile rates to be wildly inconsistent across different areas of the country, with some O/Os making money hand over fist, and others finding out they’d make more money if they chose not to drive at all.

Good News for Truckers As of July

We’re starting to see a steady rebound in trucking rates all across the country. According to data gathered by DAT Freight & Analytics, Los Angeles and Chicago have continued to improve, with substantial rate increases on nearby high-volume freight lanes.

Note: The rates listed below are averages from the beginning of June, based on actual transactions between carriers, brokers, and shippers.

  • Chicago to Columbus, OH, rose 19 cents to $2.34 per mile
  • Chicago to Detroit gained 15 cents to $2.78
  • Chicago to Allentown, PA, was up 13 cents to $2.32
  • Los Angeles to Denver jumped up another 25 cents to $3.09
  • A. to Seattle climbed up to $2.74

In addition to this good news, there was another increase on the lane from Charlotte, North Carolina, to Buffalo, New York, where the average rate increased by 20 cents to $2.31 per mile.

Prices from Atlanta down into Florida are on the way up as well. Produce season is starting to end in the southern states, so demand has begun to shift away from outbound and back toward inbound traffic. The rate from Atlanta to Lakeland, Florida, was up to $2.41 per mile at the start of June as a result.

Overall, 72 out of the top 100 van lane rates have increased, while 16 others maintained their previous levels. This makes it a great time to be on the road, and gives O/Os good reason to watch rate changes with a sharp eye in order to maximize their route efficiency.

Trucking’s Long Term Trajectory

It’s no secret the freight industry has been seeing troubling signs for a couple years running. Class 8 sales have dipped, and even before COVID-19 there were prominent news outlets writing about the freight industry being in recession.

Press surrounding trucking can be a tricky subject. It’s true transport stocks haven’t been doing well for a long time. The SPDR S&P Transportation ETF is down more than 24% year to date as of June 9, an abysmal return when compared to the S&P 500 and Dow Jones Industrial Average. This ETF is well-diversified, and a commonly used indicator for the health of the freight sector. The holding includes planes, trains, and auto companies. Uber Technologies (UBER) and Lyft (LYFT) are in the ETF now, along with the usual suspects, such as United Parcel Service (UPS), the Union Pacific railroad (UNP), trucking firm J.B. Hunt Transportation Service (JBHT), and JetBlue Airways (JBLU), among others.

While XTN is a good indicator of the transportation industry on the whole, it also includes a healthy percentage of some of the worst performers in 2020 like airlines and rideshare companies, both of which suffered monumental losses as a result of COVID-19.

The trucking industry on the whole hasn’t suffered the same level of constriction that airlines have, and the health of the industry isn’t well measured by the health of public companies. As a matter of fact, more than 95% of carriers have less than five trucks. The country is full of small, independent truck operators, and as long as rates increase, it’s expected they’ll come out just fine.

The bottom line is trucking companies are the lifeblood of America, and there’s no indication the demand for truckers is going to decrease any time soon. If you’re interested in getting started as an owner/operator, contact us at Mission Financial.

How the Payroll Protection Program is Helping Truckers

The Payroll Protection Program (PPP) is a form of federal relief that was provided to cash-starved small businesses as a response to the economic troubles caused by the COVID-19 pandemic. When the federal government signed the CARES Act into effect at the end of March of this year, it created two immediate forms of financial relief, the first being the Payroll Protection Program, a loan available to smaller businesses that delivers up to 2.5 times the amount of a business’ monthly payroll. PPP loans can be fully forgiven if spent correctly based on the government’s guidelines: payroll, rent, utilities, and mortgage interest payments.

The second form of financial relief presented came in the expanded form of Economic Injury Disaster Loans, which offer up to $2 million with a fixed low interest rate of 3.75%, coupled with a longer repayment period of up to 10 years. This loan requires collateral if the requested amount exceeds $25,000.

If you’re looking to borrow a small amount of money for your business, Payroll Protection Program Loans are superior in every way—as they always have the potential to be entirely forgiven—whereas Economic Injury Disaster Loans can only be forgiven for up to the first $10,000 borrowed, for the rest of the amount to be repaid over the loan period. For the most part, EID loans are primarily directed toward businesses too large to apply for a PPP loan, which means small businesses that qualify for PPP loans should generally pursue that avenue.

How Truckers Can Make the Most of a PPP Loan

While full forgiveness of a PPP loan is an unbelievably sound financial offer, the drawbacks on spending your PPP loan on something outside of the explicitly approved channels aren’t as bad as you might think. According to information found on the U.S. Small Business Association’s website, PPP loans have an interest rate of only 1%, which is beyond competitive when compared to loans you could have found on the private market.

A large part of driving a semi-truck is managing the up-front costs. For most people starting out in the business, it’s unlikely you’ll get seated in a capable machine without having to find additional financial resources somewhere, somehow. The great thing about trucking is that it doesn’t usually take long to start paying off big chunks of your just-starting-out loans, but it’s always a good idea to prioritize paying off those loans as quickly as you can to avoid paying too much additional interest. For some people, paying off your private loan one year earlier can make a four-figure difference in terms of just how much your rig cost to own outright.

This is where the PPP loan can come to the rescue. If you’re experiencing financial hardship, it can be a strong strategy to take out the largest PPP loan you can be approved for and use that to pay your higher interest-rate debts. This is a form of roundabout refinancing that’s legal under the guidelines for PPP loans, and it’s a practice that private lenders have been encountering and actively encouraging for drivers who have fallen into delinquency on their loans.

PPP Loans Across the Country

As more than 95% of freight carrier companies in America consist of fewer than five trucks altogether, it makes sense that PPP loans have been a large part of keeping these small businesses afloat during the economic downturn. The Commercial Carrier Journal compiled data on the subject, finding that around 100,000 trucking companies received funds of all sizes, some of which were in excess of $5 million. Local and long-haul trucking companies received $12 billion total, which is more than 2% of all the capital handed out by banks in the United States under the PPP loan program.

In a CCJ survey conducted in June, more than 60% of the fleets that responded said they had applied for PPP funds, with some carriers describing the money as vital for surviving the  post-pandemic economic landscape. Another recent survey, conducted by Overdrive, of smaller outfits (independent owner/operators and fleets operating no more than nine trucks), found more than 50% claimed to have applied for PPP loans.

In an interview with CCJ, Mike Kucharski the co-owner and vice president of JKC Trucking, the largest refrigerated trucking fleet in the Chicago Metro area, said his business would have endured layoffs without the more than $2 million loan JKC received through the PPC program. Kucharski said he used the money for payroll, a condition that should allow the loan to be forgiven, but he’s not worried even if things don’t go as expected.

“Even if it doesn’t get forgiven,” Kucharski said, “I think the interest rate they’re going to charge us is a pretty good deal.” Either way, he sees it as a win-win situation.

If you have questions about semi-truck financing, come to the experts. Mission Financial has loan officers well-versed in public and private loan practices who can help you make sense of your next best move.

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