Otis Tucker’s Chalmette-based trucking business is booming. So why are loans still elusive? | Business News

Otis Tucker’s business is booming.

The 38-year-old’s Chalmette-based haulage operation Trucking Innovation has been steadily growing revenue since it was founded nearly a decade ago. In 2020, Tucker made Inc. Magazine’s list of the 5,000 fastest growing companies in the country, coming in at No. 572 with revenue of $3.5 million — a growth spurt of more than 820% over the previous three years.

Last year, with stimulus spending during the pandemic and the passage of the $1.2 trillion Infrastructure Investment and Jobs Act, Tucker’s business shifted into a higher gear. The extra roadbuilding, levee repair work, utilities support jobs and other city and state contracts coming down the pike meant his revenues doubled to about $7 million.

Tucker now has 15 vehicles in his yard, mostly American-made Kenworth dump trucks, and he employs 25. But he says it could be so much bigger.

“Right now, we should have at least 25 trucks,” he said. “And that would mean more drivers, more mechanics, back office, dispatchers, billing — we worked out that it’s 1.4 jobs for every truck we have. But we’re being held back.”

Supply chains and loans

Two things have been holding back Trucking Innovation’s growth, Tucker says. Supply chain bottlenecks have made it hard to source trucks and equipment. The other issue is more endemic: the barriers that Black and other minority entrepreneurs like Tucker often face when they try and raise money from traditional sources.

For the first problem, Tucker scrambled and improvised as he has done for the past decade. He found a new supplier to get him Peterbilt trucks. He would have to wait though: He used to be able to drive Kenworth trucks off the lot, but so far, he has been delivered only two of the five Peterbilt trucks he ordered last August.

The supply chain issues are annoying, but the financing constraints are more persistent and more perplexing.

“My counterparts can pick up the phone and say, ‘Hey John, I’ve got another deal, call me back.’ You know, in more than nine years in business it’s just never been ‘That’s my guy, that’s my bank,’ and I could get on the phone with someone and tell them what I need,” Tucker said.

Discrimination in banking has been a longstanding problem. Jon Huntsman, a professor at Utah State University’s business school, for example, has been studying for years whether Black and minority business owners get different treatment than their White counterparts when other factors are the same.

His “mystery shopper” experiments have shown consistently disparate treatment, which continued during the pandemic when it came to loans under the Small Business Administration’s support programs. Black borrowers were offered different products and treated significantly worse by bank employees than White borrowers in 43% of the tests, the study found.

Keep on trucking

Tucker says he doesn’t like to dwell on his lending problems. Instead, he has looked for ways to get around it.

“It has made me more aggressive in trying to find new sources,” he said.

As he built the business in the early years, he found one local bank that gave him a small start. Gulf Coast Bank & Trust set Trucking Innovation up with a $25,000 line of credit. That’s helped him to manage cashflow needs, like making payroll, but it isn’t the kind of money he has needed to build a fleet of trucks.

Tucker, who grew up in the Lower 9th Ward, describes himself as scrappy but perennially optimistic. The oldest of three, he was raised by a single mother who worked as a health care provider.

He and his family were displaced for two years after Hurricane Katrina, and he went to seven different schools. He graduated from Chalmette High School and made it to community college, but he dropped out after a semester, impatient to start making money.

As a truck driver for other firms, Tucker saved up enough to buy a rig in 2009 and soon branched out on his own.

When he ran into financing roadblocks as he expanded, he sought out alternatives. That meant borrowing from a hodgepodge of other nontraditional sources such as a unit of Japanese lender Hitachi Finance. While that got him his trucks and allowed him to compete and win contracts, he was left with a complicated and expensive mix of loans that were weighing on his profits.

Tucker said the business was essentially given a lifeline last year when it was able to borrow $1.38 million through the New Markets Tax Credit program, a state-level initiative that is part of a federal umbrella program that allows for transferable tax credits for those who will lend to businesses in disadvantaged communities as long as the loans meet certain criteria.

A lifeline for Louisiana businesses

Tony Toups, a partner at Advantage Capital, which arranged Tucker’s tax credits-backed loan, said the New Markets program works because it has rigorous criteria about investment and job creation. It has a good track record in Louisiana, he noted: After Katrina, Louisiana was the country’s highest per capita user of the program as other sources of loans for small businesses trying to survive dried up.

The Legislature voted in 2020 to continue the program to help cope with the pandemic, which had hit Black and minority business owners especially hard.

“A lot of young (Black and minority) founders have invested out of pocket, maxed out their credit cards and tapped friends and family,” Toups said. “When they find it next to impossible to get a bank loan they go to nontraditional lenders, pay higher rates and it ends up making it harder for a great company to grow because they’re paying a lot in debt service.”

Last year, Tucker was literally a “poster boy” for the program as its boosters, including Gov. John Bel Edwards, former state Sen. Rick Ward, R-Port Allen, and lenders like Advantage Capital used him as an example in their efforts to garner political support.

A complicated matter

But the question remains: Why does someone like Tucker still find it hard to get bank loans? He said it was an issue to get loans at Black-owned banks he approached as well.

Tucker didn’t want to speculate, but said he has found banks generally are conservative, both in the way they apply their lending criteria and in establishing new relationships with customers.

Guy Williams, CEO of Gulf Coast Bank, said he’s not entirely sure why they ended up being the only traditional bank to lend to Tucker. “We don’t keep track of people’s ethnicity and we don’t do quotas, as they can just backfire and end up not doing anyone any favors,” said Williams.

“We finance an awful lot of startups and I think we’ve funded young Black entrepreneurs like Otis, and Hispanic entrepreneurs, and they tell other Black and Hispanic entrepreneurs and so it goes,” he said.

For Tucker, the government programs that have provided much of his financing have advantages. They’ve taken a longer-term view on lending for big purchases, plus he hasn’t had to seek outside equity investment that might have diluted his stake and risked losing his Disadvantaged Business Enterprise status, which helps him compete for contracts.

He’s not holding his breath anymore waiting for loan offers to arrive.

“I just don’t have time, nor do I want to spend energy on people who are going to say ‘No,'” he said.