The food truck industry is estimated to grow by 6.5% over the next five years, making there no better time to invest in a food truck. However, although this may seem more affordable than establishing a restaurant, there’s still a significant cost associated with establishing and running this kind of business. Therefore, securing food truck financing can help you establish your business and run it smoothly. Here’s what you need to know about food truck financing, including options you can pursue and how to use them.
Types of Food Truck Financing
Here are a few food truck financing options along with their requirements and what you can use them for.
Bank Term Loans
This is the first option that comes to mind while looking for food truck financing. In this type of loan, your bank offers a lump sum to run your business, which you repay over a specific period while paying a variable or fixed interest rate. You need an excellent credit history to secure this type of loan. This option is best to consider while starting a new food truck business since it can help cover your upfront costs.
SBA Loans
Small business loans (SBAs) are provided through banks and online lenders. These fall into two categories: fixed assets and working capital. Both options provide the necessary funding to get your equipment and secure working capital. However, these come with stringent regulations, such as providing significant collateral and receipts from your major purchases for approval.
Business Line of Credit
This is the most flexible food truck financing available. It works like credit card financing, allowing you to borrow and repay money according to your terms while paying interest on the amount you use. It also doesn’t need collateral and can max out up to $250,000. Consider this loan to purchase your inventory and cater to small, unexpected expenses.
Equipment Loan
Equipment loans offer the financing you need to upgrade, repair, or buy new equipment to run your food truck business. You can also use it to cover the cost of upgrading or renting your food truck. To qualify, you must present a solid business plan to the creditor.
Merchant Cash Advance
A merchant cash advance allows you to lend money you need quickly and repay the merchant by allowing them to take a percentage of your future business’s sale. The merchant usually determines how much to lend based on your cash flow. It’s best to use for buying your inventory or upgrading your business.
Business Terms Loan
Business term loans work like mortgages. These start with an application for the loan, followed by a down payment, and then an upfront lump sum payment. You can then repay the loan for a specific period between six months to 10 years. A business term loan can help you finance your food trailer upgrade, refinance other debts, hire workers, and purchase materials.
Secure Your Food Truck Financing With Legion Food Trucks
The food truck business is dynamic and needs solid financing planning to remain afloat. However, with various financing options available, you need to know which suits your current needs.
At Legion Food Trucks, we’ve partnered with Ford Financing to help our customers get the food truck financing they need. With good credit, we can help you make your down payment and secure the financing required to run your food truck business. Contact us to get financing assistance and begin your food truck journey.
