FINANCING FOR YOUR FOOD TRUCK OR HOT DOG CARTFirouzeh Tahbaz
In your search and final decision, you’ll want to consider a few factors that will influence your approach. To start, ask yourself questions like:
- What does your business need?
- What amount of funding do I need?
- Is the hot dog cart financing going to be used for something specific?
- What is the time frame for this capital?
- How can this amount, timing, and purpose be financed? What financing products work best?
- What other questions should I be asking?
- Can I qualify for any of these financing products?
- How would I describe my credit score?
- Can I present potential lenders with business financials or a business plan?
Finally, you should consider your budget. If you fail to repay the funding efficiently, you might want to wait until you can afford it before applying for business funding solutions.
You can narrow down your options to find a food truck or hot dog cart loan that suits your business by going through this process. To find the right bank or financing company to work with, you will need to decide which form of financing best suits your needs. This process will require you to talk to and compare financing options from multiple lenders to guarantee you are getting competitive rates and terms-and ultimately, your food truck or hot dog cart business will be funded.
Understanding your alternatives:
Whether you are going with a bank or a finance company, you need to show them that you are prepared and understand the situation before they will loan you money. So, you should create a list of the investments your business made at the beginning. Besides the hotdog cart price, it includes the cost of licensing, permits, inspections, training, site rental, startup inventory, commissary expenses, auxiliary purchases, insurance, and other company expenses like bank accounts and cell phones. Your lending company may also want to make sure that your business will be viable. Consequently, they are interested in seeing that you have done an analysis of the market prior to investing.
A food truck provides professionals and anyone interested in the foodservice industry with an easy way to get started. Increasingly popular are mobile food businesses, which are great for everyone involved – customers can get food delivered to their homes and restaurants, business owners are able to make their own schedules, and products can be tested and developed.
Plus, you’ll save on capital expenditures and overhead costs by not having a brick-and-mortar location. The food truck business still requires some type of financing.
Among the many possible financing options for food trucks or hot dog carts, you may want to start with these five:
Equipment Financing (VS. Financing the entire food truck)
Particularly when you’ve started out, and need financing for your truck, you may want to consider equipment financing as one of your food truck financing options. Additionally, if you need to purchase large equipment, such as ovens or stoves to outfit your truck, equipment financing will be one of your best options.
This type of financing allows you to purchase business equipment that will act as collateral for a loan. As its name implies, equipment financing is a specific funding method. The financing of heavy equipment can include the purchase of ovens, semi-trucks, and automobiles.
Some companies offer to cover up to 100% of the equipment’s value with equipment financing loans. The term usually lasts through the expected lifespan of the equipment, with interest rates ranging between 8 and 30 percent.
Due to the fact that equipment financing is, by definition, secured financing, you will have access to lower interest rates. In addition, these types of food truck financing often require limited paperwork and can fund within two days.
Moreover, since equipment financing lenders are most interested in your equipment (and the value of the equipment), they will be more likely to work with you even if your qualifications aren’t ideal. Therefore, this may be the best option for bad credit food truck financing.
However, you may find equipment financing from traditional banks, but the qualification process will be much more difficult. In this case, you can turn to an online lender such as Balboa Capital or Currency Capital if you require a little more flexibility with terms, timing, and application processes.
Equipment financing could be one of your most affordable, convenient options for getting financing for a food truck.
Business Lines of Credit
You may consider business lines of credit if, on the other hand, your food truck financing needs are broader. You will be able to access a pool of funds from which you can draw capital as needed through a business line of credit. You will only be charged interest on what you actually end up spending when you repay your business line of credit.
Further, after you repay the amount you spent, you can draw on your credit line again and again, whether you’re upgrading your stove, purchasing additional trucks, or weathering the winter.
With that said, business lines of credit are available for amounts up to $1 million and are typically available for periods up to five years. Generally, food truck financing products have interest rates ranging from 7% to 25%. If you work with the right lender and have the right qualifications, business lines of credit can be funded as quickly as one day.
A business line of credit, like equipment financing, can accommodate average or bad credit, and in fact, this solution can be useful in building your credit score. Online lenders, on the other hand, offer easier applications, more flexible qualification requirements, and quicker funding than traditional banks.
Are food truck loans another option you should consider? SMEs can benefit from SBA Microloans, which offer some of the lowest interest rates on the market and are available for smaller loans ($50,000 or less).
SBA loans funds to non-profits in the community that lend the proceeds to small businesses in the community through this loan program. There are probably no better loan options than SBA Microloans for new startups and small businesses that are just getting started.
In spite of this, the SBA sets a maximum term limit of six years for these loans, although much depends on which community bank you work with.
These types of food truck financing generally have rates between 6.5% and 13%. Nonetheless, average SBA Microloan rates for the new fiscal year were 7.5%.
In general, you can use an SBA Microloan for virtually any purpose, but you must meet stricter requirements if you wish to qualify for this type of loan. A business plan and strong financials will be required, as will the ability to provide collateral, or at least, a personal guarantee.
Compared to other types of financing, especially those from online lenders, SBA Microloans will be much slower to fund because the process is more complex and lengthy.
Yet, if you’re considering SBA Microloans for the cheapest loan, you’ll want to consider them.
Consider a business card as a great option to finance your food truck for smaller needs and everyday expenses. Though the smaller credit limits on business credit cards may not be sufficient to fully finance your food truck — especially for purposes like buying the truck or large items of equipment — these products are very helpful in many other situations.
A credit card for your food truck business can be used to purchase inventory, small equipment, and software subscriptions, just like a personal card. For those who are just starting out in the food truck business, a business credit card is a good option, since you’ll likely need only an average credit score to qualify. It is easy to apply for a credit card for your business online.
You can earn points, cash back, or miles as you spend on business credit cards that offer ongoing rewards programs. If you choose to use a business credit card offering a 0% APR intro period, you can carry your balance from month to month without paying interest.
As long as you pay your monthly minimum every month and clear your balance before the intro period expires, you could make a larger purchase
and pay it off gradually without accruing interest. If you are looking for 12-month intro APRs, then you should consider Amex Blue Business Cash or Blue Business Plus.
Having access to this simple and flexible financing product is always worthwhile since you can use it to cover day-to-day expenses, working capital, and building up your business credit.
What about Crowdfunding?
Finally, if you are looking for food truck financing, you might consider a crowdfunding campaign. A food truck is by definition a mobile fixture within a community, which makes crowdfunding an excellent method for truck owners to raise funds, especially from locals.
Funding your food truck can be achieved by marketing your food truck on websites like Kickstarter and IndieGoGo and inviting customers, friends, family, and strangers to donate to your cause.
A social procedure such as this is also a great choice for people with poor credit histories since donations are required. In the case of a non-qualifying loan or if you do not have time to build your credit, a crowdfunding campaign can be an appealing option for funding your food truck business.
A successful crowdfunding campaign will need a lot of skill, creativity, and persistence-not mention, advertising your campaign actively to attract supporters.
No matter what stage you’re at in your food truck business, crowdfunding is an option worth exploring, whether you’re just getting started, wanting to grow, or simply seeking working capital.