Overview of Food Truck Financing
Professional chefs and anybody interested in the foodservice industry may easily establish a company using food trucks. Food trucks are becoming more popular, and they benefit both consumers and company owners. As a food truck entrepreneur, you can be your own boss, have a flexible work schedule, test new products, and build a devoted following.
You’ll also save money on major construction investments and overhead by not having a physical presence. Even so, you’ll need some kind of funding to start your food truck company.
Despite the fact that food truck financing requires less money than conventional restaurant finance, it does come with its own set of expenses. As a result, whether you use conventional small business loans or alternative financing options, you’ll need money to fund your food truck at some point.
So, if you’re searching for the finest food truck finance, go no further than our guide.
Here, we’ll go through your top food truck financing choices as well as some real-life instances of how actual food truck entrepreneurs funded their companies. Finally, we’ll look at how to get the best food truck financing for your needs.
Financing Options for Food Trucks
Financing for equipment
Is ideal for establishing a food truck company and buying necessary equipment.
Business lines of credit
Are the most flexible way to finance a food truck, particularly for working capital.
Are the most inexpensive and best for lower investment quantities. Best for funding day-to-day food truck purchases and complementing other loans are business credit cards.
Great for innovative food truck entrepreneurs with connections to the local community, and best for a range of financial requirements.
Financing Options for Food Trucks
You’re correct if you believe you’ve seen an increase in the number of food trucks recently.
According to the “Food Truck Nation” survey conducted by the US Chamber of Commerce Foundation, mobile food businesses generated $2.7 billion in sales in 2017. This is up from $650 million in 2014, representing a 400% growth in only three years.
What makes this expansion possible? Simply put, food truck finance is the simple solution.
The food truck sector would not be growing at this rate if it didn’t have access to food truck loans to help start these companies.
As a result, if you’re searching for food truck finance, you’re probably curious about the various products available and which ones are ideal for your requirements.
Although there are a number of choices for financing your food truck, you could start with these five top food truck finance options:
Equipment financing may be one of your finest food truck financing choices, particularly if you’re just getting started and need to pay for the truck itself. If you’re seeking to make large equipment purchases, such as stoves or ovens for inside your truck, equipment financing will be one of your top food truck loan options.
Equipment finance, as the name suggests, is a kind of financing that enables you to buy company equipment that will then serve as collateral for a loan. Ovens, semi-trucks, cars, and other big equipment may all be financed through equipment financing.
In general, equipment finance loans come in a variety of sizes, with some firms providing up to 100% of the equipment’s worth. The periods are usually for the whole anticipated life of the equipment, with interest rates ranging from 8% to 30%.
Overall, since equipment financing is secured by definition, you’ll be able to take advantage of reduced interest rates. Furthermore, this kind of food truck financing often needs little documentation and may finance in as little as two days.
Furthermore, since equipment financing lenders are often more concerned with the equipment you’re buying (and its worth), they may be more willing to work with you even if your credentials aren’t ideal—making this one of the finest food truck financing alternatives for poor credit.
However, conventional banks may be able to provide equipment finance, but it will be more difficult to qualify for. If you need a bit more flexibility in terms of criteria, time, and the application procedure, an online lender such as Balboa Capital or Currency Capital may be able to help.
For example, with Currency Capital, you may get equipment financing for up to $2 million with interest rates as low as 6%. Furthermore, if you need a food truck loan under $150,000, you may be able to be approved in as little as 24 hours.
Lines of Credit for Businesses
A business line of credit, on the other hand, may be your best option if you have a broader range of food truck finance requirements.
A company line of credit gives you access to a pool of cash from which you may borrow money when you need it. You’ll only owe for the amount you really spend when you return your business line of credit, which means you’ll only pay interest on what you actually spend.
Additionally, after you’ve paid back what you borrowed, you’ll be able to use your line of credit again and again whenever you need money for your food truck—whether it’s to upgrade your stove, buy more vehicles, or survive through the winter.
Business lines of credit, on the other hand, may vary in size from $10,000 to over $1 million, with durations ranging from six months to five years. Interest rates on this food truck loan program typically range from 7% to 25%. Depending on your credentials and the lender you deal with, business lines of credit may be funded in as little as one day.
You may be able to locate company lines of credit that may handle ordinary or poor credit, similar to equipment financing, and this option can even be a good method to improve your credit score. Furthermore, conventional banks may provide lines of credit, but internet lenders will provide more accessible products—simpler applications, flexible requirements, and quicker financing times—than traditional banks.
Alternative lenders like Fundation and Fundbox, for example, both provide competitive lines of credit that you might use to finance your food truck. Fundation offers loan lines ranging from $20,000 to $150,000 with periods of 18 months and interest rates as low as 8% APR. Fundation may also fund in as low as one business day, with an average of three business days.
Microloans from the Small Business Administration
Another option for food truck financing is to use a third-party lender. SBA Microloans—these loans have some of the lowest interest rates on the market and are ideal for modest requirements ($50,000 or less).
The SBA loans money to community-based non-profits that then lend the money to local small companies via this lending program. SBA Microloans are arguably the simplest to qualify for of all the SBA loans, and they are definitely beneficial for younger or beginning companies.
Having said that, although the details of these loans may vary depending on the community lender you deal with, the SBA imposes a six-year maximum term restriction. The interest rates on this kind of food truck financing range from 6.5 percent to 13%. However, the average SBA Microloan interest rate in the 2019 fiscal year was 7.5 percent.
Overall, you may utilize an SBA Microloan for almost any purpose; but, to qualify for this kind of food truck loan, you must satisfy tougher criteria. SBA loans typically need average credit, good company financials or a strong business plan, and the capacity to offer collateral, or at the very least a personal guarantee.
Furthermore, although SBA Microloans may fund quicker than other kinds of SBA loans, the procedure will be much more complex and time-consuming than alternative financing options, particularly those offered by internet lenders.
However, if you’re searching for the most inexpensive food truck loan, you should choose an SBA Microloan.
Credit Cards for Businesses
You may choose a company credit card as a top option for your food truck finance for lesser requirements and daily expenditures. Although the lower credit limits on business credit cards are unlikely to be enough to completely finance your food truck, particularly for large purchases like the vehicle or equipment, these products may be very helpful for other reasons.
You may use a business credit card to pay for daily food truck costs like inventory, minor equipment purchases, and software subscriptions, just as you would with a personal credit card. When you’re just getting started with your food truck, a business credit card will be a fantastic choice since you’ll most likely just need an ordinary personal credit score to qualify. Furthermore, virtually every company credit card may be applied for online, with a simple and quick application.
Furthermore, the majority of business credit cards come with an ongoing rewards program that allows you to collect points, cash back, or miles as you spend. In fact, several company credit cards provide a 0% introductory APR term, during which you may carry a debt from month to month without accruing interest.
With this 0% intro APR period, you may potentially make a bigger purchase and pay it off over time without accumulating interest, as long as you pay your monthly minimums on time and pay off your amount before the intro period ends. Consider the Amex Blue Business Cash or Blue Business Plus cards, which both offer 12-month introductory APR terms.
Overall, it’s always beneficial to have access to this easy and flexible financing instrument and use it to pay for day-to-day expenditures, working capital, and establishing your company credit history, even if you wind up supplementing a business credit card with other food truck loans.
Campaigns for Crowdfunding
Finally, as one of the finest alternatives for food truck financing, you could consider launching a crowdfunding campaign. Because food trucks are movable, they are practically by definition community fixtures, thus crowdfunding is a particularly effective way for them to raise funds, particularly from their local community.
You may start fundraising campaigns on platforms like Kickstarter and IndieGoGo and ask customers, family, friends, and strangers to donate to help you support your food truck.
Furthermore, since this is a social, donation-based form of finance, it’s an excellent option for food truck financing for poor credit company owners. If you don’t qualify for food truck loans or need to establish credit before asking for other finance, crowdfunding may be a viable alternative.
To be successful at crowdfunding, you’ll need a lot of talent and imagination, not to mention the ability to stay persistent and aggressively promote your campaign.
Regardless of whether you’re just starting out, wanting to expand, or just need some operating cash for your food truck, crowdfunding is a viable option to consider.
How to Find the Best Food Truck Financing for Your Company
You’ll want to think about a few things, and how you go about your search and make your ultimate choice will be influenced by them.
To begin, consider your company’s requirements by asking questions such as:
How much money do I require?
What am I going to do with this cash?
How quickly do I need this funding?
What are the best financing options for these amounts, timeframe, and purposes?
Then you’ll want to think about your credentials:
Which kind of finance do I have a chance of qualifying for?
What is the status of my personal credit score?
What financials or business plan can I provide a prospective lender?
Finally, you should consider how much you can really spend. You may discover a business financing option that meets your requirements and qualifications, but if you won’t be able to pay back the money quickly, you’ll want to wait until you can afford it before applying.
You should be able to narrow down your choices and locate the best food truck loan for your company after going through this procedure.
You should have a better knowledge of your top options—and ideally, an idea of how to locate the appropriate food truck loan for your business—now that you’ve finished our food truck finance guide.
You’ll want to start searching for the appropriate bank or lender to work with after you’ve determined which kind of financing would best meet your requirements. You’ll want to speak to and compare alternatives from several lenders throughout this process to guarantee that you’re receiving the best rates and terms—and, in the end, get the money you need to start (or expand) your food truck company.