Food Truck Financing: How To Fund a Food Truck Business

Article Summary:

If you want to open a food truck business but need the capital to start, your best bet is to apply for a food truck loan. There are multiple food truck financing options available, including business lines of credit, equipment financing, and SBA loans. If you have trouble getting approved for a loan at your local bank, you can also search for online lenders or even seek financing from a crowdfunding platform.

Whether you’re an aspiring business owner hoping to break into the food industry or an experienced restauranteur looking to save on overhead costs, a food truck may be a great option for you. As of 2022, this $1.4 billion–dollar industry is growing at a rate of 7.9%, with no signs of stopping anytime soon.

If you’re interested in starting your own food truck business, you first need to think about the financing aspect: how much you need to get started, where that money will come from, and how you’re going to keep your business running in the long term. Fortunately, you do have a handful of financing options available, such as business lines of credit, SBA loans, and even crowdfunding.

Let’s go over all the ways you can fund a food truck to help you figure out the best way to finance your business.

What to know about food truck financing

Although food trucks have been around for decades, the food truck craze largely took off after the Great Recession of the 2000s, and it hasn’t slowed down since. Many entrepreneurs in the food industry find food trucks a particularly appealing investment thanks to their low startup costs, cheaper overheads, and flexibility of location.

Because it costs less to start and run a food truck than a restaurant, you can start seeing a return on your investment much sooner. However, before you start your business, you’ll need to be able to cover the initial expenses, including a down payment on the truck, equipment purchases, and wages for your staff.

Maybe you already have the money you need to cover these costs, either from personal funds or revenue from another business you own. In that case, you’re already in good shape to start your food truck business! If, however, you still need to secure the capital to get started, then your best bet will be to apply for food truck loans.

How to get a food truck loan

Once you’ve determined how much money you’ll need to start your food truck business, you can apply for a bank loan to acquire the funds for your startup costs. The following are some of the best food truck loans available to food truck business owners:

  • Personal loans
  • Equipment loans
  • Microloans
  • Business lines of credit
  • SBA loans

Assuming you have a good credit score, you should be able to find funding options with favorable loan terms and low interest rates.

Pro Tip

When applying for a business loan, make sure to include your business plan in your loan application so investors and lenders can get a clear picture of your business structure.

Personal loans

Personal loans are typically easier to secure but are dependent on the business owner’s personal credit history. These loans can be obtained from most banks and credit unions; simply apply online or in person at your local branch.

A personal loan can be a good option for you if you’re new to business financing and need cash right away. Bear in mind that this type of loan will depend on your personal credit score: the better your score, the more favorable the interest rates and repayment terms you can get.

Equipment loans

If you’re in need of fast funding specifically to purchase an oven or other piece of food truck equipment, you may want to consider equipment financing. For this type of loan, the food truck equipment itself is used as collateral, which can help you get lower rates than you would find with other loan options.

Note that equipment loans can only be used to purchase equipment for your food truck. If you need to finance a food truck, you’ll want to apply for a commercial vehicle loan.

WEIGH THE RISKS AND BENEFITS

Here is a list of the benefits and the drawbacks to consider.

Pros
  • Low APR compared to other loans
  • Fixed monthly payments
  • Helps build business credit (if payments are made on time)
  • Allocate cash toward other business uses
Cons
  • May come with a high down payment
  • Requires good credit for best terms
  • Cannot upgrade equipment until the end of the payment term

Microloans

Microloans are loans for under $50,000 the SBA provides via their microloan program. These are usually available to small businesses that need cash to start up and expand.

If you need less than $50,000 to start your food truck business and you fall under a minority business owner category — women, people of color, immigrants, etc. — you may want to consider applying for a microloan.

Business lines of credit

A business line of credit is an ongoing line of credit provided to your business by a bank. This can serve as a dependable support system to your food truck business, especially if you anticipate that your cash flow will vary significantly throughout the year. You’ll usually have access to up to $50,000 in funds, which you can use to replace broken equipment or pay seasonal workers to help you run your business during the busier times of the year.

Business lines of credit are typically easier to acquire for more established businesses in good financial standing, but you can still try to get one for your brand new business.

Small business loans and small business grants

The Small Business Administration (SBA) offers a loan program for borrowers who need funding for their small businesses. The SBA platform matches borrowers with lenders who are likely to meet their specific needs, thus minimizing risk for both the borrowers and the lenders.

Food truck owners who want to apply for a small business loan through the SBA will need to have a vested financial interest in running a U.S.-based business and have exhausted their other financing options. An SBA loan is a good option for food truck business owners who cannot get approved for traditional small business loans and want to avoid going into too much debt from other loans with high interest rates.

If you qualify as a minority business owner, another option to finance your new food truck business is to apply for a small business grant. Unlike a loan, you don’t have to pay these funds back to anyone; it’s essentially free money!

If you don’t want to (or can’t) apply for a business loan from your local bank, here are a couple of alternative options you can use to finance a food truck business:

Crowdfunding

Crowdfunding is a way to raise capital for a business by sourcing it from individuals who want to support the idea. Campaigns are usually set up with a specific monetary goal and options for different contribution levels that an investor can choose based on their interest in the idea or ability to contribute.

Financing a food truck through crowdfunding may be a good option for business owners who cannot qualify for a small business loan but need a significant amount of capital to get up and running. Food truck entrepreneurs can use popular crowdfunding platforms such as Kickstarter and Indiegogo to seek funding for their food truck businesses.

FAQ

What credit score is needed to buy a food truck?

Credit score requirements to buy a food truck will vary depending on the lender, but most will require a minimum credit score of 650. Borrowers with good credit will have an easier time obtaining working capital loans and any additional line of credit they might need to run their business.

What are some ways to finance your food truck business?

You can finance your food truck through a number of different routes, including credit cards, crowdsourcing, SBA loans, and equipment financing. Make sure to compare all your options thoroughly before deciding which food truck financing option is best for your food truck business.

Is buying a food truck a good investment?

Buying a food truck can be a good investment if you have a solid business plan in place and follow through on it. You’ll need to invest in the right equipment, staff, menu, and locations to become cash-flow positive, otherwise your business (and your bank account) will suffer.

What is the cheapest investment to start a food truck?

Food truck investments typically start at around $50,000, but this cost can vary significantly based on the down payment on the truck and the materials needed to run it. If that cost seems a bit steep, you can start your food truck business as a table stand or food trailer at various venues to test your concept before applying for a working capital loan.

Are food trucks profitable?

Yes, a food truck can be a profitable business, so long as you do your due diligence and put together a viable business plan. If you already have a foot in the food industry as a restaurant owner, a food truck business can definitely be a worthwhile investment.

How much of an investment is needed for a food truck?

There is no standard investment required to start a food truck business. The lump sum you’ll need upfront to cover your operating expenses will vary depending on the model of the truck, the equipment and food you’ll need to buy, and the staff you’ll need to hire. Again, a business plan will help you determine how much you will need to start your food truck business.

Key Takeaways

  • The best way to finance a food truck business if you don’t already have the money to start is to take out a food truck loan, which you can apply for online or at your local bank.
  • Food truck financing options include personal loans, equipment loans, microloans, business lines of credit, and SBA loans.
  • Equipment financing can be used to purchase equipment, while the down payment for the food truck itself can be covered with a commercial vehicle loan.
  • If you can’t get approved for a traditional business loan from a bank or credit union, you can try to obtain one from an online platform like Food Truck Lender or seek funding from a more unconventional source, such as a crowdfunding platform.

Not sure where to start your search for food truck financing options? SuperMoney can help! Start by reading our complete guide to small business loans, then use our comparison tool to find the best business loans for your new food truck business!

View Article Sources
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  2. A Brief History of Food Trucks – Institute for Justice
  3. Loans – Small Business Administration
  4. How to Start a Food Truck Business in 6 Steps – SuperMoney
  5. 5 Ways to Fund Your Business Without Venture Capitalists – SuperMoney
  6. Small Business Grants: How to Get Free Money for Your Startup – SuperMoney
  7. What Is the Best Method for Raising Capital for a Startup Business? – SuperMoney
  8. Complete Guide to Small Business Loans – SuperMoney