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How To Finance A Food Truck

Piggy bank with business stuff

The rising popularity of mobile kitchens like food trucks can be attributed to their inexpensive startup costs in comparison to more conventional dining establishments.

Finding the appropriate food truck finance can be the difference between success and failure, whether you’re just starting out or a seasoned chef looking to try something new.

What Is Food Truck Financing?

Food truck financing is a way to get the capital you need to start your food truck business. If you’ve ever had the dream of starting your own restaurant, but don’t have the money to do it, food truck financing is an option for you.

Food trucks are unique because they are mobile and can be moved easily from place to place. They’re also a great way for new businesses to get started quickly and cheaply, so if you have an idea for a new restaurant but don’t have enough money to build it, starting with a food truck may be the best way for you to go about it.

How To Find The Right Financing For Your Food Truck?

Although food truck startup costs may be lower than those for restaurants, they may nonetheless exceed your available cash. You’ll soon realize that you can finance your new company with a variety of loans.

To know which is the ideal, you can first assess your needs and your eligibility. Decide how much you need to borrow and what you’ll use it for before you do anything else.

Food Truck Start Up Loan Financing Options

Check out these non-traditional methods to obtain the financing you require if borrowing in the conventional manner is not appealing to you or doesn’t work out.

Equipment Financing

This kind of financing has a high approval rate and cheap interest rates. You don’t need to personally guarantee the loan because the equipment you buy will serve as security for the cash. In the event of default, the lender will seize the equipment you bought with the loan and sell it to recoup the unpaid balance.

SBA Microloans

SBA Microloans

The Small Business Association (SBA) oversees the Microloan Program, which provides loans to business owners to fund working capital needs or to buy supplies and inventory

Payroll costs and fees for various operating permissions are examples of items that can be included in working capital.
You must offer a personal guarantee and collateral to secure the loan when applying for it.

Business Lines Of Credit

Your food truck can continue operating without being in debt if you have a company line of credit. You only take out as much credit as you actually need at any given time, and you repay it in affordable monthly installments.

Business Credit Cards

The amount of equipment required to start a food truck business can cost far more than you will bring in revenue for the first few months, so a business credit card isn’t the ideal option for initial start-up fees. This indicates that it is unlikely that you will rapidly pay off the credit card. Your credit card purchases’ interest continues to accrue throughout this time.

Your company’s credit card should only be used for urgent needs or fast reimbursable charges. For instance, if the truck breaks down, a credit card can pay for the repair and let you resume operations.

Crowdfunding Campaigns

By requesting several little donations, crowdfunding enables you to raise money through your social network. Ask your supporters to give if you find that you need money for running expenses.

How To Qualify For Food Truck Financing

Although the terms for financing food trucks vary depending on the lender, there are some commonalities.

  • Borrowers must have been in operation for at least six months and earn at least $100,000 per year in income. If your credit is less than ideal, you may also be required to submit collateral or a cash down payment, or you may be required to apply with a co-signer who has good credit.
  • The required credit score for food truck loans varies as well, and the higher your personal credit score is, the lower your interest rates and fees will be. A higher credit score can also allow you to make a lesser down payment. 
  • Even if you have bad credit, you can still be able to acquire financing if you have valuable collateral. For instance, since the truck and the equipment are significant collateral, loans for the equipment and the vehicle may be simpler to qualify for.

What Credit Score Do You Need To Avail Loan For Food Truck Business?

To evaluate your eligibility, lenders may review both your personal and corporate credit histories.

Although each lender will have different credit score criteria, a personal credit score of at least 550 to 640 is usually required

The better your credit score, the less you’ll pay in financing fees for food trucks. Additionally, you might not need to put as much money down for a loan if your credit score is higher.

What About Financing A Food Truck With Bad Credit?

finance food truck with bad credit score

If your personal or business credit score is low, search around until you discover a financing option you qualify for with a reasonable rate. Different financing choices assess factors like your personal or business credit scores differently.

A lower credit score can be acceptable if you’re considering a business car loan or equipment financing because the vehicle or equipment will serve as security. This reduces the chance that the bank will end up in the red should you be unable to repay the loan.

However, be aware that the cost of food truck loans may be greater if you don’t have good credit. You’ll be eligible for better terms and may be able to save some money over time if you can postpone taking out a loan and can take your time developing your credit.

Food Truck Financing Rates And Terms

Depending on your qualifications, the state of your credit, the type of financing you select, and other factors, a lender will offer you different rates and terms.

You might be eligible for equipment loans with borrowing limits of up to several million dollars and repayment lengths of one to six years. Rates in percentage per year begin at about 3%.

With rates ranging from 0% for borrowers with excellent credit to 13% and loan periods of up to six years, SBA microloans are available up to $50,000.

The amount you can raise through crowdfunding is normally not capped, however you should be aware that you will have to pay 3-5% in credit card or PayPal processing costs in addition to the platform’s 5% fee. You could not receive any money if you don’t completely reach your goal amount.

You could be able to borrow up to $250,000 with food truck lines of credit, and rates start at roughly 5%.

Additionally, when shopping for credit cards, search for ones that provide introductory 0% APR; otherwise, the rates will typically increase to 13–20%. Your overall cost of financing using credit cards might become quite significant if you only make the minimal payment each month.

How To Use Financing To Grow A Successful Food Truck Business

how to finance a food truck

Make the most of your new food truck loan as soon as you receive it. Make sure you use the money to expand your firm by having a plan for how you’ll spend it.

You could employ the loan to:

  • Employ additional people.
  • Boost your menu.
  • Fix the vehicle.
  • Upgrade the machinery.
  • Finance marketing.
  • Have a plan in place for paying back the loan.

What’s The Bottom Line?

The largest choice for business owners when it comes to food truck finance is deciding which loan, line of credit, credit card, or crowdfunding site best meets their needs.

When conducting your research, be sure to account for all the costs that your small business loans will need to pay for. In addition to the need for working capital, particularly if your food truck business is new, you’ll also need to pay for things like permits and licenses to run a mobile food truck. 

In order to ensure that customers with a range of credit histories can be approved for financing, Feed Wagons works with lenders.

We strive to make it as simple as possible for you to buy our products. Due to this, we teamed up with Quick Lease, a company that offers financing for trailers with a $20,000 maximum loan amount, and are currently seeking out additional lenders.


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