Monday Morning News

So You Want to Open a Food Truck In 2022?

So You Want to Open a Food Truck in 2022?

By: Joe Camberato

CEO of National Business Capital

 

Here are some tips for getting the financing you’ll need to get started

 

Food trucks are popping up everywhere. In fact, there are currently 35,512 food trucks in the U.S. – a 13.7% increase over the total number in 2021.

 

It’s no surprise entrepreneurs and restaurants are jumping on the food truck bandwagon. Owning a food truck can be a highly profitable business and a great source of additional cash flow. Best of all, launching a food truck business generally involves fewer start-up and operational costs than a traditional restaurant.

 

While getting started is relatively easy, one hurdle that many entrepreneurs face is the fact that many financial institutes consider food trucks a “transient business,” – which makes securing financing a bit more challenging. The typical start-up cost for a food truck business is generally between $50,000 to $250,000. Financing the vehicle itself and necessary kitchen equipment will take up the largest percentage of those costs.

 

Credit Score Matters

 

As a rule of thumb when financing a food truck, banks are looking for a credit score of 680 or higher. Obviously, there is some flexibility in this.  There may be some wiggle room if you have a substantial down payment to make or can use the vehicle itself as collateral.  On the other hand, online and FinTech lenders will probably be more flexible, but their rates may be higher.

 

You’ll need to shop around for the right deal, as the type of lending product you ultimately select will have an enormous impact on your approval odds. Some food truck financing solutions emphasize your credit score over other criteria and vice versa, so it’s best to identify your strengths and find the right lender to fund your venture.

 

Basic Bank Lending Options

 

If you already own a business or a restaurant and want to add a food truck into your mix, you’ll qualify for either an equipment loan or a working capital loan. For an Equipment Loan, you’ll typically need to provide a small down payment, and your tricked-out food truck itself will act as collateral for the loan.

 

Working Capital loans are short-term loans designed to give you an influx of cash to buy inventory ahead in anticipation of a busy period or, conversely, to get you through a slow period such as winter when food truck sales are slower.

 

Alternative Lending and Merchant Capital Financing

 

Many people think that merchant cash advances are only for retail businesses or wholesale suppliers, but this financing type is popular among all types of businesses – including food trucks.

A merchant cash advance is essentially an advance on your business’s future sales. In other words, you’ll receive a cash injection now, which you’ll repay as a percentage of your future credit card sales.

Merchant cash advances work incredibly fast and are best for short-term financing needs. Your credit score will also have less weight when you apply for this type of financing.

 

 

When You Have No Cash or Suffer from Bad Credit

 

If cash flow is tight or you’re not in a good position to secure financing, consider renting a food truck to get your business started. Renting a vehicle gives you the luxury of seeing if you can make the business work and what kind of monetary success the business is capable of achieving.

You might have to borrow from family or friends or max out a credit card to initiate the rental, but this is probably the least risky way to determine if the business is right for you.

 

Which is Right for Kick-starting your Food Truck Dream?

 

Finding the right solution depends on so many different factors; it might be best to consult a business advisor to go over the details of your particular set of circumstances.  They can help you identify options with the lowest possible interest rates, the most appropriate funding amounts, and the best repayment terms.

 

How long you’ve been in business, what kind of down payment you can bring to the table, and your credit score are all major factors, especially when looking to secure a bank loan.  But don’t let a bank manager stand between you and your dreams.  There are other lending choices available that will be the right fit for your new business.

 

If you’re unsure about which food truck loan is best for you, consider consulting with an expert business advisor.

 

About the Author:

Joe Camberato is the CEO of National Business Capital, the leading fintech marketplace offering streamlined small business loans.

To read more articles about the industry visit www.trnusa.com/blog

To see videos of TRN Networking Meetings visit our YouTube Channel Today’s Restaurant and be sure to subscribe and like it.

To view some short interview videos go to https://trnusa.com/videos-2/

To apply for your ERTC refund go to https://trnusa.com/apply-for-your-erc-recovery-funds-now/