Food truck financing options: Food trucks let both professional chefs and anyone with a dream to quickly stand up a business. And much better, you can be your own boss, have a flexible work schedule, test new products, and grow a loyal following.
Though food truck financing might require a less capital than traditional restaurant financing, it will still come with its fair share of costs. Whether you finance a food truck from your pocket or you secure a food truck loan, you are going to need access to capital to purchase your wheels.
As such, here is a comprehensive guide to food truck financing. And though many of your top options are types of food truck loans, there also are a few less traditional food truck financing sources to consider.
Types of Food Truck Loans
It’s true, your food truck could apply for a traditional business term loan to cover a one-time cost. If it can meet the eligibility requirements. But many lenders do not want to give an unsecured loan to businesses without strong, steady cash flow — which many food trucks just do not have. Instead, consider one of the following options.
Most banks and credit unions offer some form of personal loans. Actually, personal loans take your credit score and personal credit history into account for approval and for interest rates. Depending on the financial institution, you can apply online often with fast approval.
A personal loan used to start a food truck can often be much easier to secure than a small business loan, especially if it is for a new company. Rates can vary greatly based on creditworthiness, which means applicants with good to excellent credit tend to receive the most favorable rates.
Citibank offers personal loans from $2,000 to $50,000, with rates which varies between 7.99% APR to 17.99% APR. You can choose a repayment terms of 12, 24, 36, 48, or 60 months.
Wells Fargo offers competitive personal loans nationally, from between $3,000 to $100,000 (unsecured). Terms range usually from 12 months to 60 months. Interest rates will also change depending on the credit score and region, but can range from 5.24% to 22.99%.
Small Business Administration (SBA) Loans
The SBA loan program reduces the risk to both lenders and borrowers seeking small business loans to start or to expand a business. While the SBA does not technically lend the money, it can help borrowers find appropriate lenders whose loans meet their strict guidelines.
The SBA gives small businesses access to loans from as little as $500 to $5.5 million with competitive rates on non-guaranteed loans.
Microcredit is typically under $50,000 but it can be as small as a few hundred dollars. Microlenders always target underserved populations, like immigrants, minorities, and female entrepreneurs. Microlenders also tend to provide other guidance or community support to their borrowers to help their small businesses along.
Microloans might be a good option for food trucks on the lower end of the budget: under $50,000. They could be an especially great option if you are from an underserved population and don’t have access to more conventional funding.
Grameen works exclusively with female entrepreneurs, starting with a series of free financial and business workshops followed by a small loan for $2,000. The loan comes with continued support as the business is growing.
A nonprofit microlender in the U.S., Opportunity Fund is targeted towards women- and a minority-owned small businesses. Its median loan is for $21,000, and the loan holders have a median household income of $38,000. It works with low-income families and business owners who do not have access to more traditional financing options.
Business Line of Credit
Business lines of credit are usually more challenging to access for small, startup businesses than for those with a proven financial track record. Because the line of credit is provided on an ongoing basis, the bank needs to ensure you are in good financial standing.
If you can get an approval for a business line of credit, it’s one option that can help you through the unpredictable ups and downs of running a food truck.
Did your fridge blow up and needs to be replaced? Did you hire another staff member to help you through a busy month? A business line of credit is valuable as the short-term bridge between a low and high cash flow.
Typically , they are under $50,000 and are not suitable for making large asset purchases or for managing long-term financial issues.
Bank of America Business Line of Credit
Bank of America offers a business line of credit starting from $10,000. Also, borrowers earn rewards based on the business bank balance and for adding more Bank of America products to their accounts.
PNC Business Line of Credit
PNC technically has multiple lines of credit on offer for any business. One of these options is the Choice Credit which requires no collateral and boasts easy access to funds between $20,000 and $100,000. Interest rates and details usually vary between products and depend on business creditworthiness.
Equipment loans for food trucks makes perfect sense for startup operations. Why? Because the equipment is what sets your food truck apart from a normal truck. There is a chance you will need to install sinks, ovens, griddles, exhaust fans, shelving and more before you can serve your customers.
Many banks that cater for businesses will have an equipment loan option. You will need to have good credit standing to apply and likely a down payment on the equipment, anywhere from 5 percent to 20 percent of the total cost. Equipment loans can also be offered through the dealer, although this is likely rare for a food truck.
Wells Fargo Equipment Financing
The finer details of the equipment loans offered by Wells Fargo are available as you work with the customer service agent. Under the details of their Commercial Transportation Financing, Wells Fargo gives loans with set terms and seasonal payment structures, among many other options.
Crest Capital Equipment Loans
Crest Capital provides an easy application for equipment and vehicle loans up to $250,000.
Peer-to-peer business loans are organized businesses and an investors. Now, they are commonly sourced from peer-to-peer lending sites that connect businesses needing financing to a potential investor.
These third-party companies screen members, service the loan, and make the process as easy as possible for both parties. Food trucks are usually a popular choice for an investor. However, despite the popularity, the terms and conditions of the loans most times, usually vary.
Food truck businesses can benefit from a peer-to-peer investment, especially if they seek investors within their region who understand the market. It might be a good option if you are unable to get more traditional loans.
This platform connects investors to borrowers, providing a safety net to both parties. A borrower may qualify for loans between $5,000 and $300,000, with terms between 6 months and 60 months. All investments with LendingClub have yearly interest rates from 10.00% to 35.50%.
For food truck businesses, however, peer-to-peer lending might be a good option for food truck loans, or if you are a new business that is already up and running, some of the shorter-term solutions might be better.
Financing a food truck business does not have to be as challenging as you think. So, plan out your cash flow, budget for the foreseeable future, and also explore which food truck loans make the most sense for your situation.