Trying to break into this industry but don’t have the funds to make that dream come true? You might want to think about financing a food truck. Yes, you can finance your food truck, whether it is $50,000 or $200,000. Of course, there are many factors that come into play when it comes to getting food truck financing.
To get a better idea of that concept, we will break down three situations/examples for you. By doing so, you will hopefully have a better idea of how food truck financing works, and if it is the right option for you.
RELATED: When Is The Perfect Time To Start A Food Truck Business? Are you thinking about opening up your own food truck business? If so, make sure you are opening it up at the right time. Check out this article to get all of the details on that subject.
Situation 1: Strong Financials
Let’s say Fred and Tara are starting a new food truck business. Fred’s credit score is 780 and Tara’s is 800. On top of that, both have experience in the restaurant business. This is, of course, beneficial when it comes to owning and operating a mobile kitchen. Fred and Tara also have $50,000 in the bank and own a house.
To put the cherry on top, they have a strong business plan for their food truck business.
Side note: If you plan on financing your mobile kitchen, and also want to be 100 percent prepared for what the mobile catering industry throws at you, then you need an all-star business plan. That is the case for any business, in fact.
Even with their impressive credit scores, experience in the restaurant business, $50,000 in the bank and ownership of a house, Fred and Tara will still most likely have to make a downpayment of 10 to 30 percent of the total financed cost. They are also likely looking at an interest rate of six to 15 percent.
Remember, you don’t have to be rich to buy a food truck. However, having some money saved up and a great financial background are invaluable weapons when it comes to getting food truck financing.
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Situation 2: Average Financials (A Challenge To Finance)
Here’s one of the biggest problems: Most people with an average financial background expect an easy approval, a low interest rate and a small downpayment. Lenders look for safe investments with collateral. Whether a person has collateral in cash or assets, the loan is easier to get approved.
Let’s look at Will’s finances as an example. Will has an 800 credit score but only owns a car. He has $10,000 in the bank. Will also needs to get a working capital loan to help start his business.
In this example, Will gets a $35,000 loan and uses $30,000 as the downpayment, and he still has extra money for starting capital.
Now, in Will’s case, he might not have enough money to buy a food truck business. But this is a real-life situation we are providing, so this is the type of thing you should expect to see if you are trying to get food truck financing. Everyone’s situation is different, though.
RELATED: Lessons Future Mobile Kitchen Owners Can Expect To Learn In The Food Truck Industry. Needless to say, you are going to learn so many lessons during your time in the food truck industry. Check out this article to get a sneak peek on some of these lessons.
Situation 3: Below Average Credit (Hard To Approve — This Person Needs Help)
The only way to get approved with a poor financial background is by having a large downpayment. A person in this scenario could also get a cosigner. However, you have to be up front with your cosigner, and they have to know that you can pay off your loan. The last thing your cosigner wants is getting stuck with the bill (in this case, the loan) if you are not capable of making the payments.
Let’s look at Jeff’s situation: Jeff has a 560 credit score with no assets. This is a huge problem, but all is not lost as long as Jeff can find someone to help him raise the funds for a downpayment, or he can find a qualified/worthy cosigner.
While all three of these situations might be different from one another, here is one thing they all have in common: In all three situations, financing a food truck is possible. Every single example is different, but getting food truck financing is still possible. This means your dream of entering the mobile kitchen industry is still alive even if you don’t have the cash to buy a food truck. Of course, it pays to have good credit, assets and a good amount of money in the bank. After all, if you don’t have any of those things, then you are going to have to find an all-star cosigner. Plus, you are also going to have to find the funds for a downpayment.
People think they can just get financing with no strings attached, but banks aren’t just going to give you money because you ask for it. You not only have to look good on paper (good credit score, money in the bank, assets, etc.), but you also have to show the bank (or whoever you are getting a loan from) that you are going to be able to pay them their money back. That’s where experience and a killer business plan comes into play.
Nonetheless, financing is a great option when it comes to starting your food truck business. Heck, in some cases, it might be your only shot at purchasing a mobile kitchen. The three examples above should give you a great idea on how the process works.
Happy food trucking!
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