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How to get food truck financing

Turning your passion for cooking into a food truck business takes capital. Purchasing and outfitting a vehicle alone can cost $50,000 or more. While personal savings or loans from friends and family may seed your startup costs, obtaining financing specifically tailored to the food truck industry is ideal for getting your wheels rolling.

This article will guide you through the most common food truck financing options, from SBA loans to equipment financing to business credit cards, and provide tips to improve your chances of approval. With the right funding secured, you can fire up the grill and start delighting customers in no time.

What do you need to start a food truck business?

If you’re looking into how to start a food truck business, one of the first considerations is startup costs. Here are some of the main expenses to consider:

  • Food truck vehicle: This is often the biggest cost, with new trucks priced at $50,000 to $100,000. A used food truck can range from $10,000 to $40,000. Consider the type and size of truck needed for your menu.
  • Kitchen equipment: Ranges, grills, refrigerators, freezers, etc. can cost $5,000 for more affordable food trucks, up to $20,000, depending on the type and quantity needed. Don’t forget utensils, pots/pans, dishes, etc.
  • Custom wrapping/painting: To give your truck a unique brand and look when building a food truck business, wrapping can cost $2,000 to $5,000. Custom painting also falls in this range. 
  • Permits and licenses: Requirements and costs vary by location, but plan on permit fees from $200 to $1,000 annually. Health department fees, fire inspections, etc. may also apply. 
  • Insurance: Food truck insurance costs about $1,000 to $5,000 annually for general liability, commercial vehicle coverage, etc. Product liability insurance may also be required.
  • Commissary/commercial kitchen: If preparing food elsewhere, leasing a licensed kitchen can cost $500 to $2,000 monthly. Also factor in storage fees if needed.
  • Inventory/supplies: Initial inventory of food, paper goods, cleaning items, etc. can range from $1,000 to $5,000 to start. Maintaining consistent inventory also costs money.
  • Labor: Staffing your truck will incur ongoing costs for wages, taxes, and workers comp insurance, if applicable.

So in summary, if you want to know how to open a food truck business, plan on spending $60,000 to $150,000+ upfront, along with ongoing expenses like labor, supplies, and insurance.

How to buy a food truck

Whether you need food truck financing with bad credit, want to know how to start a food truck with no money, or are looking for traditional food truck business loans, you have several options available. Here are the main avenues for financing a food truck investment.

Equipment loans

If you’re looking for funding specifically for the vehicle and equipment, food truck lending companies specializing in asset based financing may offer lower rates than unsecured loans.

Pros

  • Potentially lower rates than unsecured loans
  • Payments coordinate with useful life of equipment 

Cons

  • Typically shorter terms 3-5 years
  • Only finance equipment purchases

Small business loans

Getting a small business loan from a bank is a common route. The SBA offers microloans up to $50,000 and 7(a) loans up to $5 million. Banks offer commercial loans for food trucks too.

Pros

  • Lower rates than credit cards
  • Fixed monthly payments
  • Longer terms up to 10+ years

Cons

  • Strict approval criteria
  • Collateral often required
  • Early repayment penalties

Business credit cards 

Business credit cards can help cover smaller startup costs. Just be sure to pay off balances quickly to avoid high interest charges.

Pros

  • Fast and easy to get
  • No collateral required
  • Can reuse for ongoing purchases 

Cons

  • High interest rates if balance not paid
  • Lower limits than business loans

Crowdfunding

Platforms like Kickstarter and GoFundMe allow you to raise startup funds from community supporters. Provides capital without loan repayment.

Pros

  • No repayment needed
  • Validates demand/marketing 

Cons

  • All or nothing model
  • Lots of promotion needed

Investors

Find private investors who believe in your food truck concept and pitch them for startup capital in exchange for equity/shares.

Pros

  • No repayment or collateral
  • Mentorship sometimes provided 

Cons

  • Give up equity and control
  • Pressure for high returns

Business partners 

Bringing on a business partner can provide you with capital to share startup costs rather than taking all the risk.

Pros

  • Share skills and workload
  • Split startup costs 

Cons

  • Give up some control
  • Shared profits

Home equity loan 

If you have sufficient home equity, a home equity loan or line of credit can provide funds using your home as collateral.

Pros

  • Typically lower interest rates
  • Interest may be tax deductible 

Cons

  • Risk losing your home as collateral
  • Closing costs and fees

The best funding mix for financing food trucks depends on your specific situation and startup costs. Weigh the costs and repayment terms carefully for any debt financing.

How to get a loan for a food truck

When applying for financing, it’s important to make your food truck business look as appealing and low-risk as possible to food truck lenders. The keys are demonstrating that you have experience in the food industry, have invested your own funds, and have projections showing realistic profits and an ability to repay the loan.

First, emphasize any culinary degrees or prior restaurant experience on your resume; this shows you have food service knowledge. Even if you’ll be hiring a head chef, experience managing a commercial kitchen or food operation is ideal. Next, show the lender that you have ‘skin in the game’ by investing 20-30% or more out of your own savings. This demonstrates commitment and reduces risk for them.

Provide a viable business plan with realistic costs outlined for the truck, permits, ingredients, labor, etc. and conservative revenue projections based on reasonable customer counts and menu prices. Show how you’ll generate enough monthly profit to cover the proposed loan payment plus other operating expenses. Having a solid social media following or having partnered with events/breweries to guarantee sales helps too.

The more professionalism and preparedness you exhibit, the better your chances. With solid industry experience, a well-researched plan, and your own capital invested, you become a lower-risk borrower that a lender will be more confident approving for a food truck loan.

Picking a food truck lender

When choosing a lender for food truck or food trailer financing, here are some important things to consider.

  • Experience with food trucks: Seek lenders like credit unions or specialty lenders that understand the unique aspects of the industry, including how to start food truck businesses. 
  • Flexible terms: Look for loans that allow flexible repayment terms aligned with your business cycles and seasonal revenue swings. Avoid lenders pushing unsuitable repayment terms.
  • Low rates and fees: Compare interest rates and avoid lenders tacking on large origination/admin fees. Food truck loans should have competitive rates.
  • No prepayment penalties: Choose lenders that let you pay off the loan early without penalty in case your business takes off quickly.
  • Quick process: The lender should be efficient at processing loans and funding them quickly. Lengthy delays could impact your truck build and opening.
  • Responsive support: Even after getting financing, you want a lender who is easy to reach and transparent with communication in case any issues arise. 
  • Financial health: Review the lender’s financial statements and credit rating to ensure they are fiscally sound and able to provide ongoing support.

Taking the time to learn how to finance a food truck and vet lenders thoroughly gives you the best shot at finding one that will be a partner throughout the lifetime of your business.

Time to finance your food truck startup

Now that you have an idea of how to start your own food truck business, you can start the process of looking for new or used food truck financing. By considering the different loan and funding options available, analyzing the costs and benefits of each, and putting together a strong loan application, you can obtain the necessary capital to turn your food service dreams into a reality.

With passion for your cuisine, smart money management, and a little elbow grease, your new custom food truck will be serving hungry customers and establishing your culinary brand in no time.

FAQ

What do I need to start a food truck?

To start a food truck you need a reliable used or new vehicle, commercial kitchen equipment like grills and refrigerators, permits and licenses, insurance, inventory, and some starting capital for upfront expenses. A fully-equipped food truck can cost between $50,000 to $100,000.

Can you finance a food truck?

Yes, financing a food truck is possible through options like small business loans, equipment loans, business credit cards, and other resources. Lenders will want to see a solid business plan with realistic financial projections before approving a food truck loan.

How can I get a food truck with no money?

If you don’t have personal savings or access to loans, you may need to fundraise, find investors, or secure financing 100% through the truck dealer or manufacturer by having them hold the title until it is paid off. Coming up with some personal capital is ideal to get more favorable loan terms.

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