How Can You Use a Food Truck Loan?
Food truck loans can be used for a variety of reasons including:
- Purchasing a food truck or food trailer - Buyers can decide whether to use the funds for a used or a new truck or trailer.
- Maintaining a food truck or food trailer - Owners can use money to keep up with the repairs and maintenance required to keep their truck or trailer in running condition.
- Obtaining food storage systems - Setting up the truck or trailer with equipment and systems is one of the ways borrowers can use funds.
- Marketing and advertising materials - Another way is to use money borrowed is to help promote the business through marketing and advertising materials.
- Staffing and payroll needs - Especially during times of growth, business owners may need funds to cover staffing and payroll needs in order to keep up with expansion.
- Food inventory - Stocking inventory is something every food truck or trailer business needs and a business loan can help cover these expenses.
- Truck or trailer repairs - As with any vehicle, repairs will be necessary and small business loans can help cover as they add up.
- Expand your business - When a business owner experiences success and wants to open another food truck, business loans can help get the expansion started.
- Unexpected bills - Whatever unexpected expenses come up, food truck financing can help cover the gaps and keep your business up and running.
How Much Does It Cost To Finance a Food Truck?
Starting a food truck business can oftentimes cost more than an entrepreneur had in mind, especially depending on where the business is located. Starting and maintaining a food truck can cost on average over $28,000 for permits, licensing, and ongoing legal compliance alone. To get a food truck up and running can take months and cost up to $100,000 or more.
While there are upfront costs such as obtaining a truck or trailer, setting it up, purchasing equipment, and stocking inventory, there are also the long term costs such as maintenance, regulation, and paying employees.
How to Qualify for Food Truck Financing
The ability to qualify for food truck financing depends on the company. Some have higher required credit scores, time in business, and annual revenue requirements than other companies. If you’re curious if you qualify or not, most companies allow you to apply online in order to determine your eligibility and see what options are available for you.
After application you will likely need to submit or electronically link bank statements and other required financial information. Having a proven track record and higher credit score will help guarantee financing options and help secure the lowest rate possible.
How Does Food Truck Financing Work?
After filling out an application online to see if you qualify for financing, a customer service representative may contact you to get further information and discuss loan options. For other companies the entire application may be done online. From there companies will require financial records either by linking your bank accounts to your application or submitting them after applying. Most companies will also pull credit scores.
Once officially approved and depending on the type of financing, some companies will offer same day or next day funds, while others may take a few days or longer. These funds will transfer to your bank account, or if you have a line of credit, you will have a card you can use to access the funds as you need them.
What Credit Score Do You Need to Buy a Food Truck?
Most companies require a credit score of at least 550-600 to qualify for food truck or food trailer financing. However, there may be some companies out there that don’t require a credit score making food truck financing with bad credit a possibility. For companies that do the require a credit score the higher the score the more likely the business will be able to secure a more favorable rate.
Although starting a food truck can be an expensive endeavor, financing a food truck can make it doable. Traditional banks, credit unions, and other small business loans providers may be hesitant to provide lending, but there are several companies that will extend credit. If you are considering taking out a business loan for food truck purchase or maintenance be sure to weigh all options. Your credit score, annual revenue, time in business, as well as other factors will determine how much of a loan you can take out, as well as the interest rate you’ll receive.