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Financing a Food Truck in a Tough Economy

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Starting a new business always comes with challenges, especially in the food industry. However, if you have been dreaming of your food truck, the idea of doing so in a tough economy can be daunting.

Food truck financing

Many people had big dreams before COVID-19, but those hopes got put to the side during the lockdown. As the government loosens restrictions, you can start to dream again but, with experts warning of a possible recession, you’ll have to approach your dream with caution and a good strategy.

Statistics show that the mobile food industry has been growing quickly. The industry increased from $800 million in 2017 to $985 in 2019. It is also much less expensive to get into the mobile food market than to open a brick-and-mortar shop.

Owning your food truck is still a possibility, even if you can’t afford to buy it outright. You just need to consider alternative methods of funding your dream. A loan is your next best option if you are not lucky or daring enough to use your savings or money from family and friends.

However, getting a bank loan is not easy, especially if this is your first business venture, or you don’t have a strong credit rating. If you still want to apply for a bank loan, be prepared to show them a lot of paperwork. You will also be expected to put more money towards a down payment on your food truck.

One of the most important things to keep in mind is that buying your food truck, equipment, and supplies to get started is one thing, but managing to be successful is quite another. To make a real go of it, you should be a good chef and have a solid business plan in place.

Finding financing to get started is not as difficult as most people think. There are some different options open to you when it comes to paying for your food truck.

Financing Options for Your Food Truck

If you are not able to buy your food truck upfront, you’ll need to search out an avenue of financing. Here are some of the options you can pursue:

  1. Get a loan to purchase your food truck

    If you have good credit, getting a loan for your food truck enterprise should be pretty straightforward. Rather than approaching a bank, however, find lenders that deal specifically with vehicle loans, as they will be able to meet your needs better. The Truck Loan Center even offers vehicle financing tailored specifically for those looking to buy a food truck.

    Most of these companies will allow you to fill in an application online so you can get the process started quickly. Even if your credit isn’t great, there are still some loans that you will qualify for. This means it is worth applying or even just contacting a loan officer. It’s a good idea to line up some extra support for your loan application, including:

  • A co-signer

    This should be someone who is not taking out the loan with you, but rather is acting as a supporting party. The co-signer says they will cover the loan for you if you default. This gives the lender a higher security level that can bring down the rate you’ll offer.

  • A downpayment

    The more money you can put towards a downpayment, the less you will have to borrow, which is another thing that lenders like to see.

  • Collateral

    Lenders will also be more likely to work with you if you can put some collateral down to secure the loan. Most often, this is a house or car. The asset protects the lender from losing all of their money in case you are unable to pay back the loan. Remember that putting collateral forward for the loan means that if you default on the loan, the lender can come and take that asset.

  • Quality of the food truck

    One additional thing you will want to consider is the type of food truck you want to buy. Most lenders will reject a vehicle that is not in good condition. This means you should consider factors such as mileage, etc.

  • Business plan

    If you show lenders that you have a business plan, they are more likely to want to lend money to you. A business plan shows that you are serious about being successful as a food truck owner. It also demonstrates initiative, which is something else that lenders like to see.

The Don’ts of Food Truck Financing

Starting a new business can be exciting, but there are a few things you should avoid when launching your food truck service. These include:

  1. Getting bogged down in financing

    While raising money to buy your food truck — equipment and supplies — is important, don’t let it consume you. Other areas need your attention, such as creating a menu and promoting your food truck.

  2. Undeveloped plans

    Starting a food truck business is like any other venture, and you will need a plan. Be sure not to jump into finding funding before you have a strategy for success.

  3. Obsessing over interest rate

    While a higher interest rate does mean you will be paying more over the long run, don’t let it hold you back from your dreams. If someone is offering to lend you more money at a higher interest rate, while another lender offers you less money at a lower interest rate, don’t be afraid to take out more money at a higher rate. If that’s the sum you need to get started, and you are confident in your plan, go for it.

If you have been dreaming of owning your own food truck, it is possible to accomplish it even in a tough economy.

For more information about financing options for food truck purchases, call Truck Loan Center at 1-866-230-0094 or contact us here.

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