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PPP money lowered freight rates during pandemic’s darkest days: Convoy

Freight rates in April were lower by more than 2% in part of the impact of the Paycheck Protection Program, according to intriguing new research by Convoy Logistics. 

Aaron Terrazas, the director of economic research at Convoy, went through thousands of data points to reach that conclusion.

“I was surprised at how strong the results were,” Terrazas told FreightWaves. “It’s an important topic.”

April is a particularly important month in looking at the market. Freight rates mostly held up in March, boosted by a consumer rush to stock staples such as toilet paper at the start of the pandemic. But once that rush had run its course and the economy sunk into its pandemic shutdown, freight rates plummeted in April, a drop so severe that it led to a blame game against brokers and President Donald Trump declaring that drivers were getting “screwed.”

Terrazas is not citing the PPP money as the sole reason for the drop. But having pored over data of who got loans and matching those up against Convoy’s data on who was submitting bids for freight at that time, he came to the conclusion that PPP funding most certainly was a factor. 

“We estimate that in April 2020, after PPP loan distribution began, carriers that received PPP loans initially bid 2.6% below carriers that did not receive loans, and submitted final bids 2.2% below carriers that did not receive the federal loans,” Terrazas writes in a draft of a report Convoy will be issuing soon but which he shared with FreightWaves in advance. 

What Terrazas also found was that this development was very specific to April and into the first part of May. He did not see that sort of more aggressive bidding in January and February by those companies that got PPP money a few months later.

By mid-May, when most companies say the worst of the freight market plunge had started to ease, “the effect had disappeared,” he wrote in the report.

Ths chart shows’s “all-in” rate for Los Angeles to Dallas, per SONAR

Although numbers between 2% and 3% might not seem like much, Terrazas stressed that “by statistical significance, it is a lot.” Asked whether it was “meaningful,” he replied that it was “small, but it is real.”

“For me, the compelling point is not only that it was lower in April, but this is different from what these carriers did before and later,” he said.

Convoy and Terrazas were able to perform this analysis because they had several key pieces of information. First, they had data from the Small Business Administration which reported the specific names of companies that received PPP loans in excess of $150,000. That information could then be used to identify the PPP recipients who were also using the Convoy platform and what their bids were. 

Second, they had the SBA information on recipients of PPP money in amounts less than $150,000. Names were not disclosed with that information, but ZIP codes were. Convoy could match up its information on its bidders with the likelihood that a logistics company that got money from the SBA in a certain ZIP code was also likely the company with that ZIP code that they saw bidding on certain pieces of freight. 

And by process of elimination, they could identify bidders on the Convoy platform that had not received any PPP money. With that information in hand, plus the data on what was bid, Terrazas and Convoy could come to its conclusion. 

But there is another fact that jumps out from the Convoy data: It was the smaller carriers that got hurt by the downward price pressure on rates that PPP added on top of an already weak market, because PPP money was not spread equally over all carriers. 

The average size of PPP loans for all industries sunk over the life of the program. PPP began in late April and ended in August after an extension. The average size of a loan dropped more than $100,000 during that time span. .

Terrazas said Convoy’s research found that the median carrier getting a loan that was also in the Convoy database had 28 trucks. But the median carrier overall that got money, but wasn’t necessarily in the Convoy database, had one truck. 

Even if you take out individual owner-operators and carriers with fewer than five trucks from the data, Convoy found that carriers that received PPP funds initially bid 1.8% less than carriers that did not receive any money. 

“PPP was a very complicated program,” Terrazas said. “For some carriers it was important for them staying afloat. But it did tick the scales of the market in favor of those companies that were able to get loans.” And those companies tended to be bigger. 

“Companies that received a lifeline were able to be in a better position to survive that panic period,” Terrazas said.

In the company’s research, Terrazas and Convoy found “some evidence that the program did contribute to fewer carrier bankruptcies, at least in the near term.”

The bankruptcy rate for truckload careers had been increasing in the weeks and months leading up to the crisis, Convoy says in its research. That rate slowed as PPP money was being distributed.

Since then, based on those companies that bid on loads through Convoy, midsize and large carriers that did not get PPP loans suffered a few bankruptcies. Among those that got PPP funds, none suffered that fate, according to Convoy. 

Among the stimulus programs still being discussed in Washington, reviving the PPP while allowing companies that got one loan to get a second has been discussed. The first PPP round only allowed one loan, but it also ended with more than $140 billion allocated and unclaimed. In particular, the last weeks after the extension doled out just a few billion dollars in loans that were far smaller than what went out first. 

A company that wants to get ready for a possible next round — and maybe be in position to be a stronger bidder, should the trends Convoy found repeat themselves — should be getting prepared now, Terrazas said. 

The most important step would be to establish or strengthen a relationship now with a commercial banker who can work alongside a potential recipient of PPP money, Terrazas said. 

More articles by John Kingston

Drilling Deep: Trucking got big money from PPP; what will be the impact?

Drilling Deep: Loan forgiveness is the next big step as PPP moves toward its completion

PPP money poured into trucking; did it keep capacity alive?


  1. John Sulla

    It seems like the criticism from many on LinkedIn that FW’s is becoming the voice of Convoy is ringing true. Score another for the convoy marketing department.

    If anything the stimulus enabled many carriers NOT to take on cheap freight because they no longer had too. Terrazas only references PPP money but it wasn’t just PPP money:

    1) PPP
    2) EILD
    3) unemployment

    You were paying carriers of one truck below operating cost. They went to the White House to protest. They blocked roads in Texas, CA, Etc , To protest dismal rates and convoy and the like did noooooooooooothing from November 2019 to May 2020.

    Then rates starting climbing and now what is Convoy doing? Pushing for new “ innovative ways” to hedge spot rates from rising calling it “ dynamic pricing” “ guaranteed primary pricing “. Why? Because they were forced to go back to their customers and ask for more money in order to cover their freight obligations. That’s the truth.

    1. Jon M

      Completely agree with this! Convoy can definitely do a lot of good in our space but you hit the nail on the head with this one. Trying to snag a quick PR win, with what is likely spotty data at best.

  2. Jon M

    I may be wrong but initial thought is that if Convoy was easily able to identify exactly which carriers had taken PPP loans, they would add this data into their freight/carrier database.

    – If they were able to narrow this down as accurately as they claim, I’d say it’s safe to assume they used this information to offer lower rates to us carriers who did take the PPP loan. No? And if the SBA did provide this information to Convoy, should we not be upset the SBA is providing our sensitive info (zip codes and loan sizes) to Convoy?

    Honestly, I find it hard to believe that the SBA would provided such a large data set to Convoy. This article just seems to be a ridiculous PR move by Convoy to make people believe their algorithms weren’t pushing such cheap pricing to take advantage of us during the height of the pandemic.

    Just my opinion, but seems a little crazy to blame it all on the PPP loans that helped keep us in business…

  3. Art

    PPP is the biggest fraud yet of taxpayer money.
    $700 million for almost bankrupt YRC…
    Zombie companies must fail, better run companies will fill the void.
    We should not interfere with natural selection.

  4. Stephen Webster

    A number of larger trucking companies over 100 trucks in Canada lowered spot rates in April to $1.60 cd for dry and flatbed loads and reefer load s to approximately $1.80 cd per mile. Many of these C T A members used this wage subsidy to force out owner ops with their own authority. I know of several truck garages that were buying 10 plus older repoes a week and we’re cutting up about half of them for parts and scrap. It is estimated the wage subsidy in Ontario and lack of insurance has caused over ten thousand people to leave trucking in Ontario Canada and some where over 6,000 trucks to be scraped and 3,000 to be sitting on farms. When I and others before coronavoius was bad had camped out at Queen’s Park from January 24 to March 17 of this year the government ignored the insurance issues. When I and others complained to the Ont government and the C T A members actions would reduce truck drivers numbers as small trucking companies had to close. I was told by a O T A staff member they had no places I trucking. This same staff member was lobbying for over 10,000 more foreign truck drivers for their members as low freight rates ment this could not afford to compete with the pay scale of other jobs in Ontario.

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John Kingston

John has an almost 40-year career covering commodities, most of the time at S&P Global Platts. He created the Dated Brent benchmark, now the world’s most important crude oil marker. He was Director of Oil, Director of News, the editor in chief of Platts Oilgram News and the “talking head” for Platts on numerous media outlets, including CNBC, Fox Business and Canada’s BNN. He covered metals before joining Platts and then spent a year running Platts’ metals business as well. He was awarded the International Association of Energy Economics Award for Excellence in Written Journalism in 2015. In 2010, he won two Corporate Achievement Awards from McGraw-Hill, an extremely rare accomplishment, one for steering coverage of the BP Deepwater Horizon disaster and the other for the launch of a public affairs television show, Platts Energy Week.