Are you about to start a food truck business and need the money to buy a truck? here is a step-by-step guide to easily obtaining food financing.
The main obstacle that most often prevents entrepreneurs from achieving their dream of owning a business is the lack of financing. …
If you are planning to start your own food business, you will probably need money to start a business, and getting the right information is all you need to start a business on the right path to growth. , expansion and, of course, profitability.
In this article, we’ll try to explore everything you need to know, as well as the pros and cons of funding your food business.
First of all;
How big is your Food Truck business idea?
To know the exact amount you will need to fund your truck business, you need to determine the type of food truck business you want to start. The best way to get a perfect idea of the size of your food truck business is to look at your vision and mission statement.
If your vision and mission statement indicates that you want to run a local food business that will only operate one minivan in a small town, you may not have to fully seek funding for the business. , especially if you already have savings.
On the other hand, if you are looking to start a standard truck sales business that will operate in all major cities and hope to get into franchising, you may want to consider the financing options available in your city or town. country.
The Real Deal for Starting a Food Truck Business – Buy a Standard Food Truck
When it comes to starting a food truck business, your main expense will be the purchase of a standard food truck that can successfully pass a medical exam. Unfortunately, the truck will also be one of your biggest expenses. There are three options for buying a catering truck and it will be of great benefit to you if you are aware of all the costs and risks associated with each of these options.
The truth is, the decisions you make when buying a catering truck will definitely have a positive and negative impact on your business.
Food Truck price range
To make the right financing decision, you need to 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 grocery cart available to you.
There is no way to accurately fundraise for If you do not know the current prices of food trucks available in the market, you must remember to buy a used food truck, especially if you have taken the bad decision to buy a used truck. and a badly defective food truck can hurt your business without even starting it. Also, before you make a decision, you need to consider long term maintenance costs.
Below is a rough estimate of how much to pay when buying a food truck in the United States of America:
For used food trucks Without kitchen
To buy a standard and beautiful used food truck without a kitchen in the United States of America, you have to pay between $ 50,000 – $ 100,000 .
The advantages are that it is cheaper than new ones and if a catering truck has been used recently it may already be licensed to operate in the area. This will of course save you time in obtaining the permits. The downside is that the risk of hidden costs for engine and kitchen repairs will be high, especially if the previous owner did not properly maintain the truck.
Also, if the vehicle has had a warranty or kitchen equipment, it will likely expire before you start using it. The implication is that you should be prepared to pay out of pocket for any issues the truck may encounter while in use.
Another thing about used food carts is that even though everything is fully functional and tested. a used food truck will probably look a bit rough. Therefore, a thorough cleaning and, of course, cosmetic repairs inside and out will be required.
For a new mobile kitchen on a used truck chassis
If you want to build your own mobile kitchen on a used truck chassis, you need to spend between $ 75,000 – $ 100,000 . The price of an old truck can be around $ 50,000, and sometimes you can find them starting at $ 35,000 .
The advantages are that you are building a new mobile kitchen on a used truck. will save you cost, but the downside is that as usual the used truck may have some mechanical issues that could damage your business. It’s a fact that when you buy a used truck and equipment, you can’t be sure what works and what doesn’t, even if you are driving with your own mechanic.
Indeed, the general condition of the truck and the kitchen is difficult to assess. The owner may have postponed maintenance to save money, which means you inherited more issues.
It is also extremely difficult to obtain financing for a used grocery truck. No loan officer is willing to issue loans because the condition of the truck and equipment is questionable and it is too risky for banks and financial brokers to lend used trucks.
For a brand new truck with a new kitchen
If you have the cash or access to finance, you have to pay for a brand new truck with a brand new kitchen. The costs are between 100,000 and 175,000 dollars.
Research shows that there are several food-focused banks that can help finance a new kitchen construction for as little as 4.5 percent and a new standard truck for as little as 3 percent. Come to think of it, a 1.5% percentage difference can lead to significant savings on your monthly payment plans and you can use that money for other interests in your business.
The good news is that when you buy a whole new kitchen on a whole new truck, you can eliminate most of the hidden costs, including maintenance costs. The purchase of a new truck comes with a warranty, typically a 5 year / 100,000-250,000 mile warranty depending on the truck model.
We do not exclude that with the purchase, you will have more options to finance a new kitchen on a new truck. This is possible because you and the bank understand the value of the two parts that make up the whole.
Plus, buying a new kitchen means you have new appliances which usually come with a year old. manufacturer’s warranty. New devices are less likely to require repair than old equipment and do not require as much maintenance.
Another major benefit that you get by buying a new truck and a new kitchen is that you will save on interest rates. In fact, you can get separate loans for new car and new kitchen in United States of America.
Obtain financing for your food truck
As an entrepreneur wishing to finance your food truck, you have the possibility of accessing loans or rentals.
1. Loan parameters
For example, in the United States, if you are looking to buy a food truck, commercial auto loans or equipment loans are your best financing options. These loans can help you purchase an expensive custom food truck without having to pay the full purchase price out of pocket. The actual amount you have to spend before owning a food truck is 10 to 20 percent of the truck’s total value.
When you have finished making the required down payment, the lender will loan you the balance so that you can take possession of the vehicle immediately. You will then have to repay the loan through a monthly payment plan within a specified time frame. Your monthly payment will be applied to your loan balance as well as the interest charged by the lender.
If you manage to repay the loans as agreed, you can officially become a food owner. So you can do whatever you want with it. You can choose to rename and customize it, trade it in for a new truck, or sell it immediately if you wish.
The bottom line is that if you are already running a successful food truck business, the best option for buying a food truck and kitchen is to get a loan from your bank or any financial institution that lends for such a business. It might not be easy at first, but the truth is that once you can pay off your loan without default, you will become the official owner of the vehicle.
Getting the necessary collateral has always been a major obstacle in accessing loans, but good enough if you don’t have collateral you can still get your loan. This is because in the United States of America, and perhaps most countries around the world, for most equipment and vehicle loans, the equipment purchased – in this case your food truck – will be used as guarantee.
<strong> 2. Lease option
To finance your truck, you can also opt for leasing. Renting a food truck is like renting one. Leasing has some similarities to a loan for a car or equipment. When renting you must pay a deposit. After paying the deposit, you can start using the grocery truck to get cash.
After signing the lease, you agree to make monthly payments over a period of time, and on average, this is 2 to 3 years. After your lease ends, you can return the vehicle and sign a lease for a new truck. Some lenders may also give you the option of paying a lump sum at the end of the lease to purchase the truck.
The leasing option is suitable for aspiring entrepreneurs in the industry who would like to have a try to find out if they can pitch their tents in the business or for those who are interested in this business but do not have the capacity to properly buy a food truck or get a credit point.
Entrepreneurs carry it this way because if things don’t work out as planned, they’ll go out of business without losing much because they haven’t invested a fortune in it. With rental options, you can simply return the truck at the end of the rental period. Renting is a good option when you are not yet sure you want to stay in the industry.
Finally, if you are planning to start a standard food truck business in the hopes of expanding it to a new business. borders, then buying your equipment with a loan is your best bet. While lower down payments and lower monthly payments are more profitable in the short term, renting is often more expensive in the long term.
Here are some recommended options if you are looking to finance your food truck business in the United States of America.
- If you are looking to buy or lease a food truck, your best type of loan is equipment financing , and your best lender for this option is Lendio.
- If you are looking to increase the working capital of your food truck business, the best loan option is SBA Loan and SmartBiz . your favorite lender
- If you are looking to raise funds to finance the supplies and inventory for your business catering trucks, your best bet is the loan margin credit and Fundbox your lender you need.
- If you are looking to raise funds to pay for your hiring then your best bet is to choose an installment loan and of course StreetShares is the most preferred lender.
- If you are looking for funds to finance your food truck business cash flow deficit, you will need a short term loan and OnDeck is the most recommended lender to handle this type of financing.
- And lastly, if you are looking to raise money for emergency work, the best type of loan for this is a business credit card , and of course, Chase Ink Unlimited is the most recommended lender and the leader in this. respect.
You have everything you need to know, plus all the pros and cons of food truck financing; Read again and make a decision on how to start and fund your food truck business. Good luck!