Looking to ramp up your food truck business amid a competitive industry? While operating a food truck has lower startup costs than traditional brick-and-mortar restaurants, expenses still add up. Food truck business loans can help.
How Will You Use Food Truck Financing?
Running a food truck is hard work—waking up early, working late and, while your customers’ satisfaction is rewarding, you need working capital to continue churning out delicious meals. Whether you’re considering expanding, upgrading or simply need a little help staying afloat, small business food truck funding can help you reach your goals.
Repair or Upgrade Equipment
As a food truck owner, the more meals you serve, the more miles your vehicle racks up. Maybe your food truck got off the ground with the help of used equipment and it’s time to upgrade. Maybe your engine needs a tune-up, or your griddle has seen better days. The bottom line is if your truck isn’t running, your business isn’t running. Financing for your food truck can help you repair or upgrade equipment, stay on the road and keep making the dishes you’re passionate about.
Make Marketing Moves
Since you may rotate through vending locations frequently—possibly daily—communicating with your customers is a must. But marketing adds more work (and costs) to your heavy plate. With the help of food truck funding, you can outsource your social media marketing, invest in online ads to bring in new business or refresh your branding.
Expand Your Fleet
After hitting your stride as a food truck owner, maybe you’re ready to do more. This could look like expanding into the catering business and booking more private events, or attending more festivals. Food truck loans can help you cover anything from vending fees to adding another truck or more employees.
Best Food Truck Financing and Loan Options
Let’s review how to get a loan for a food truck and the best funding options available. Be aware, depending on the lender, there may be minimum requirements specific to revenue, credit score and time in business.
Maybe your food truck needs a new engine or generator to bring it up to speed. Or a broken heater is making it hard to spend cold mornings prepping your food. An equipment loan can help you. With equipment financing, you may be able to cover the total value of the machinery you’re looking to purchase. There’s no time to waste when your food truck is out of commission, but luckily you can receive an equipment loan in as little as 2 days. Minimum credit scores for these loans typically range from 600-620.
Understanding your credit score
Food truck owners with higher personal credit scores will be rewarded with better financing terms. FICO credit scores range from 300-850, and most forms of alternative funding—including lines of credit and short-term loans—require credit scores in the 500s.
If you’re in search of food truck financing but have bad credit, consider the following options:
- Short-term loans
- Working capital loans
- Merchant cash advances
- Business lines of credit
Learn more about how credit scores are calculated and how to improve your score.
Working Capital Loans
In the food truck business, you can experience financial highs and lows throughout the year. When the slow season hits, a working capital loan can help you cover food costs, fuel and other operational costs. Or this type of financing can help you stock up ahead of a busy calendar of festivals and events. Either way, working capital funds can be used for anything that keeps you running in the short term.
You can have a decision in a day, depending on the lender. Working capital loans often have shorter repayment terms—these are typically repaid within 18 months—because of their intended use for short term needs. Minimum credit score requirements vary by lender but can be as low as 500, making this option feasible if you’re financing a food truck with bad credit.
Merchant Cash Advances
Need fast financing for your food truck and have bad credit? A merchant cash advance< (MCA) can provide you with an advance of funds based on your truck’s expected revenue and cash flow. MCAs have the most flexible qualifications, and can be made available the day of approval. Smaller repayments are made daily or weekly over 3-18 months.
Lines of Credit
With a business line of credit, you’re approved for a set dollar amount—functioning similarly to a credit card, but with the possibility of higher limits. You don’t have to use the whole amount at once, and you’ll only accrue interest on what you borrow. As you pay off your debt, the credit line is restored up to its original limit. This could be attractive for your food truck business since it offers both purchase and payment flexibility.
Depending on your needs and whether you want to put down collateral, you can apply for a secured or unsecured line of credit. Each type has its benefits and drawbacks. Typically, the minimum credit score requirement to obtain a business credit line is 560.
Business Term Loans
Are you thinking more long term for your business? Ready to make a big investment—perhaps a new, fully equipped truck to expand your footprint? With a large, one-time influx of capital and repayment stretching across months or even years, a business term loan could be right for you.
Beyond large equipment purchases, business term loans can be helpful if you’re looking to add to your lineup of cooks, refinancing previous debt and more because of their more favorable interest rates. Loan amounts and repayments vary based on a variety of factors, including term length. Generally, you need a minimum credit score of 600 to qualify for a business term loan.