Are you about starting a food truck business and you need money to buy a truck? If YES, here is an in-depth guide to getting food truck financing with ease.

A major hurdle that most often than not stops entrepreneurs from fulfilling their dreams of owning their businesses is lack of finance.

If you are planning to start your own food truck business, you are likely going to need money to get the business started and getting the right information is all you need to launch the business on the right path to growth, expansion and of course to profitability.

In this article, we will try to examine everything you need to know plus the pros and cons of financing your food truck business.

First Things First;

How Big is Your Food Truck Business Idea?

In order to know the exact amount you will need when financing your food truck business, you should come up with an idea of the kind of food truck business you want to start. The best way to get an ideal picture of how big you want your food truck business to be is to look at your vision and your mission statement.

If your vision and mission statement point to the fact that you want to run a local food truck business that will operate only one mini food truck within a small town, then you might not have to go all out to source for finance for the business especially if you have some savings already.

On the other hand, if you want to run a standard food truck business that will operate across major cities and you hope to go into franchising, then it won’t be out of place to look at available financing options that are available in your city or country.


The Real Deal in Starting a Food Truck Business is Acquiring a Standard Food Truck

When it comes to starting a food truck business, your major expenditure will be acquiring a standard food truck that can successfully pass health inspection. Unfortunately, the truck will also be one of your biggest expenses. There are three choices when it comes to purchasing a food truck and it will be of great benefit to you if you are aware of all the costs and risks associated with each of the choices.

The truth is that the decisions you make when purchasing a food truck will definitely impact your business either positively or negatively.

The Price Range of Food Trucks

Making the right financing decision requires that you know the current prices in the food truck industry, the real and hidden costs and risks, and the pros and cons of each type of food truck available to you.

There is no way you can accurately raise finance for your food truck business if you don’t know the current prices of the food trucks that are available in the market.

You must remember that getting a used food truck especially if you make the wrong decision to purchase a worn out and very faulty food truck can cripple your business before it even gets started. Plus, before making any decision, you should consider the long-term maintenance costs.

Below are estimates of the amount of you are expected to pay when buying a food truck in the united states of America:

For Used Food Trucks Without Kitchen

In order to purchase a standard and good looking used food truck without a kitchen in the United States of America, you are expected to pay between $50,000$100,000.

The Pros are that it is cheaper when compared to brand new ones, if the food truck has been in use recently, it may already be permitted to work in the area. That of course will save you the time used in pursuing permits. The cons are that the risk of hidden costs of repairs to the engine and kitchen will be high especially if the truck was not properly maintained by the previous owner.

Also, if there were warranties in place for the vehicle or the kitchen equipment, they will likely be expired before you start using it. The implication is that you should be ready to pay from your pocket when fixing any faults that the truck will likely develop during usage.

One other thing about used food trucks is that even if everything is totally functional and passes inspection, a used food truck is likely going to look a bit little rough. Hence it will need thorough cleaning and of course aesthetic repairs inside and out.

For a New Mobile Kitchen on a Used Truck Chassis

If you want to construct your own mobile kitchen on a used truck chassis, you are expected to spend between $75,000$100,000. The price for an older truck can be around $50,000, and at times you may find some for as low as $35,000.

The Pros is that constructing a new mobile kitchen on a used truck will save you cost, but the cons are that as usual, used truck may likely develop mechanical problems that can cause down turn for your business. It is a fact that when you buy used truck and equipment, you cannot be too sure what works and what doesn’t even if you go with your own mechanic.

This is because the overall condition of the truck and kitchen may be hard to assess. The owner may have delayed maintenance to save money, which means you inherit more problems.

Besides, it is extremely difficult to get financing for a used food truck. No loan officer would want to issue loans because the condition of the truck and equipment is questionable, it’s too risky for banks and financing brokers to provide a loan for used trucks.

For Brand New Truck with a New Kitchen

If you have the money or access to finance, then it will pay you to go for a brand new truck with a brand new kitchen. The cost implication for that is between $100,000$175,000.

Research shows that there are some food truck-friendly banks that can help you finance new kitchen builds for as low as 4.5 percent and a standard brand new truck for as low as 3 percent. Come to think of it, the 1.5 percent difference in interest can add up to big savings on your monthly payment plans and you will be able to use the money for other interest in your business.

The pros is that when you purchase a brand new kitchen on a new truck, you will have succeeded in eliminating most of the hidden cost including maintenance cost. Purchasing a new truck comes with warranties, usually a 5-year/100,000-250,000 miles’ warrante depending on the truck model.

We are not ruling out the fact that you will have more financing options available when you buy a new kitchen on a new truck. This is possible because both you and the bank understand the value of the two parts that make up the whole.

So also, purchasing a new kitchen means that you will have new appliances, which usually come with a one – year manufacturer warrantee. New appliances are less likely to need repairs compared to used equipment and won’t require as much maintenance.

Another important advantage you get when you purchase brand new truck and kitchen is that you will save money on the interest rate. As a matter of fact, you can get separate loans for the new vehicle and kitchen in the United States of America.

Getting Financing for Your Food Truck

As an entrepreneur who is looking towards financing your food truck, you have the options of either accessing loans or lease.

1. Loan Options

In the United States for example, if you want to purchase a food truck, commercial auto loans or equipment loans are your best financing options. These loans can help you purchase an expensive food truck with customized kitchen without having to pay the full purchase price out of your pocket. The actual amount that you are expected to spend before taking possession of the food truck is between 10 percent to 20 percent of the total cost of the truck.

When you are done making the required down payment, the lender will loan you the remaining balance so that you can take possession of the vehicle immediately. Thereafter, you will be expected to pay back the loan through monthly payments plan over a set period of time. Your monthly payment will be applied to the balance of your loan, as well as to interest charged by the lender.

If you can successfully pay back the loans as agreed, then you can officially become the owner of the food truck hence you can do whatever you deem fit with it. You can choose to rebrand and customize it, trade it in for a new truck, or sell it outright if you choose to.

The bottom line is that if you are already running a thriving food truck business, then your best option when it comes to acquiring a food truck and kitchen is to access a loan from your bank or any financial institution that gives out loans for such business. It might be challenging initially, but the truth is that once you are able to clear off your loan without default, you will become the official owner of the vehicle.

Getting the required collateral has always been the major obstacle for accessing loans but good enough, if you don’t have collateral, you can still get your loan. This is so because in the United States of America and perhaps in most countries of the world, for most equipment and vehicle loans, the equipment being purchased — in this instance, your food truck — will serve as the collateral.

2. Leasing Option

The other options you can leverage on when it comes to financing your food truck is to go the route of leasing. Leasing a food truck is akin to renting it. Leasing has some similarities with vehicle or equipment loan. With a lease, you are required to pay a down payment. After paying your down payment, you can start making use of the food truck to generate money.

After signing a lease agreement, you will agree to make monthly payments over a period of time and on the average, it is between 2 to 3 years. Once your lease ends, you can return the vehicle and sign a lease on a new truck. Some lenders may also give you the option to pay a lump sum at the end of your lease to purchase the truck.

Leasing option is suitable for entrepreneurs who are new in the industry and would want to taste the waters to know whether they can pitch their tents in the business or for those who are interested in the business but don’t have the capacity to out rightly purchase a food truck or access loan facility.

Entrepreneurs tow this path because if things don’t work as planned, they will quit the business without losing much because they did not invest a fortune in the business. With leasing options, you can simply return the truck at the end of your lease. A lease is a good option when you are not yet sure if you’re in the industry to stay.

Lastly, if you have plans to build a standard food truck business with the hope of expanding the business to new frontiers, then purchasing your equipment with a loan is your best bet. While a lower down payment and lower monthly payments are more cost-efficient over the short-term, a lease is often more expensive over the long term.

Here are some recommended options if you are looking towards financing your food truck business in the United States of America.

  • If you are looking towards purchasing or renting a Food Truck, your best loan type is to go for equipment financing and your best lender for this option is Lendio.
  • If you are looking to raise working capital for your food truck business, your best loan option is SBA Loan and SmartBiz should be your most preferred lender
  • If you are looking towards raising money to finance the supplies and inventory for your food truck business, then your best loan option is Line of Credit and Fundbox is your ‘go to’ lender.
  • If you are looking towards raising finance to handle your hiring & covering payroll, you best loan options is to go for Installment Loan and of course StreetShares is the most preferred lender.
  • If you are looking for finance to plug your Cash Flow Shortages in your food truck business, the you would need Short-Term Loan and OnDeck is the most recommended lender to handle this type of financing.
  • Lastly, if you are looking towards raising finance to handle Emergency Funds, the best type of loan to take care of this is Business Credit Card and of course Chase Ink Unlimited is the most recommended lender that are leaders in this regards.

There you have it, everything you need to know plus the pros and cons of food truck financing; read through again and make up your mind on how to go about starting and financing your food truck business. Good luck!

Solomon. O'Chucks