If you are interested in financing or leasing-to-own a food truck, there are a few things you need to know to ensure you are making the right move:
- Know your credit score
- Have a business entity
- Know your odds
- Have a comprehensive plan
- Find a trustworthy food truck manufacturer
1- Know your credit score:
Equifax, Experian & Transunion, the 3 credit reporting agencies, are required by law to provide you with one free credit report per year. Knowing your credit score will give you a more accurate idea of how likely you are to obtain a business loan to finance your food truck.
Also, if you declared bankruptcy in the last 5 years, have recent late payments, open collections or judgments, you should understand that the odds of obtaining financing for a business venture are very unlikely. There are no hard and fast rules in terms of a minimum credit score to obtain financing, however, your credit should be generally be good or above average.
2- Have a business entity:
Some car dealers make it very easy for consumers to “sign and drive” an expensive vehicle nowadays. But financing a food truck is much different. A food truck is a business. Therefore, financing of a food truck will require a business loan. So, whether it’s a corporation, LLC or simple doing business as (DBA) certificate, you will need to have a business formed before applying.
3- Know your odds:
The majority of new businesses fail within the first three years, many within the first year. And food businesses have one of the highest failure rates of any industry. With these statistics in mind, finance companies are very conservative when lending to start-ups. Therefore, you’ll need to be realistic when applying for a loan. Calculate what your minimum investment should be and apply for a reasonable loan. You chances of getting declined are much higher if you have little money to invest and decide to apply for a massive loan.
4- Have a comprehensive plan:
In order to figure out how much money you will need to cover your expenses, you will need to put pen to paper and calculate even the minor details. Take note of expenses such as: food, labor, supplies, permits, inspections, commissary fees, waste fees for gray water and grease, gas, vehicle maintenance and insurance. Don’t forget taxes, payroll and other costs like accountants and attorneys, which will vary depending on location and professional caliber. Now, realistically calculate how much food you think you can sell at what price on a typical day, week or month. Because food trucks can be risky to lend on, even with good credit you can expect to pay about $350 per month per every $10,000 financed
*estimated payment based on a 3 year term. Actual payments may be higher of lower based on credit. Other terms available. After doing the math if it still makes sense to apply for financing, contact a food truck builder that offers financing and also check rates of different financial institutions.
5- Find a trustworthy food truck manufacturer:
The last thing you need after you have applied for a loan is to have your food truck manufacturer spend “your money” carelessly. Before signing a contract make sure you know exactly what you will be getting for your buck. For more tips on what to ask your custom food truck manufacturer, check out our previous post.