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Tips on How to Finance Your First Food Truck

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If you are interested in financing your first food truck then you will likely seek out financial food truck tips in order to turn your dreams into reality. There are also many things that you should be aware of before you finance a food truck, as the terms and conditions may not be the same as those for a conventional truck loan. Here, we will provide a number of financing food truck tips so that you will be able to make an informed decision that will speak directly to your unique financial and food service needs.

Tips on How to Finance Your First Food Truck

Crowd Funding

Crowd funding involves trying to acquire funding from the general public in return for certain benefits or perks for doing so. It should also be noted that while each individual may only contribute a seemingly meager amount, a large amount of people can end up contributing an amount sufficient enough to finance your first food truck.

In fact, garnering the financial support of a large population can also serve as a form of free marketing, as many of your financial supporters may also become patrons before you even open your truck for business. Furthermore, you may not even have to pay back your crowd funders in cash. Instead, you can offer them, let’s say, a free dessert or amuse bouche, or offer them a discount on an X amount of meals ordered.

It should also be noted that there are a multitude of different crowd funding platforms on the internet, so you may want to narrow your search by seeking out a platform that specializes in the food and beverage industry. For instance, you may be able to obtain marketing support for social media purposes, gather insider market analytics and research data, and even gain access to a network of food connoisseurs.

Obtaining a Loan From Loved Ones

This option may be available to you some who are more fortunate. After all, your family and friends are more likely to trust your integrity than a conventional lender, such as a bank. They will also be more likely to understand your passion for your business. However, if you do decide to take out a loan from one or several members of your family, it is important to lay out the terms and conditions of your loan in writing.

For instance, you may decide to sell stock or equity to your friends or immediate family. However, operational control sharing with loved ones may prove to be troublesome in some cases, so you should think carefully before determining if sharing operational control is what is best for you and your food truck business. In some cases, straight-up debt may be preferable to equity, as the terms tend to be more straightforward, which may reduce the risk of conflict down the road.

Credit Unions

If you decide to take the credit union route then you should be aware that you will be charged interest on the balance of your loan. As such, if you pay off a large amount of your food truck loan per month then the amount of interest that you pay will go down over time. Hence, if you are confident that you will generate a significant amount of revenue during the first few formative months of your new business then the credit union option may be the right choice for you.

Bank Loan

Many entrepreneurs who want to start their own food and beverage business will go and see their local bank as their first option. Now, while going to a bank would not be our first choice, it does have certain merits.

Many banks will be hesitant to issue a loan to a startup, which will be the situation that you will be in if you are planning on obtaining financing for your first food truck. Still, if you are able to obtain a loan, and are willing to place a significant amount of your business and/or personal assets as collateral, then you may be able to obtain fairly low interest rates in the process.

The Landlord

While many first-time restaurant owners may not consider asking their landlord for help, it may not hurt to ask if they would be willing to cut a deal with you in exchange for a set amount of your returns or in exchange for equity. The end result is that you may be offered lower monthly rent payments in return, so the landlord option may be a viable one in some instances.

Home Equity Loan

A home equity loan, which is also known as a 2nd mortgage, will use your home as a form of collateral in order to obtain the loan. In addition, one of the benefits of a home equity loan is that you do not need to specify what you will be using the funds for.

As a result, you can opt to use the money to open a food truck business. However, the home equity loan option comes with several caveats. This may include if your business goes bankrupt, which is the case in roughly 60% of restaurant businesses within the first 36 months, then you will not only become unemployed but will also lose your home as well.

Credits Cards

Credit cards should be used as a last resort, despite the temptation of travel points and cash back benefits, having to pay an interest rate of 25% or more, as well as the risk of ruining your credit score, are generally not worth the price of admission.

However, if you decide to use credit cards to obtain financing then you should set goals that are realistic. In other words, determine how many cards you can realistically afford to use as well as how long it would take you to pay them off, and then stick to your financial strategy and goals.

If you would like more financial food truck tips, or would like to obtain an affordable food truck loan, then please visit our website or give us a call at 1-866-230-0094.

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