The Food Truck Industry in 2020

The market size of the Food Truck Industry in the U.S in 2020, measured by revenue is $1.1 Billion and growing fast. (In 2010 the industry in revenue was approximately 4.5 million.) The market size of the Food Truck industry in the US has grown 4.1% per year on average between 2015 and 2020.

Food trucks may seem like fun, but they require serious planning to be profitable and sustainable. The food truck business is not just about your passion for food. It’s a combination of choosing the right truck and equipment, razor-sharp planning utilizing proper time management, efficient food cost management, marketing/social media, knowing what events are profitable and what you should not participate in and most importantly making people happy with your product, the food! 

How you spend your time is extremely valuable to the success of your food truck business. The time cleaning, shopping, prepping, menu development/adjustments, driving, emails, interacting with staff and employees, marketing, increasing catering sales, etc. will make your head spin! So, you’ll need food truck financing that works with you and your need for working capital, equipment financing, and other small business requirements. Your business plan relies on different ways to finance food truck operations — and you need a reliable partner like AdvancePoint Capital by your side.

The Primary Factors Affecting the Food Truck Industry

What to Lookout For:

Low Capitalization (Not Enough Cash Reserves)

This is a problem for all businesses, let alone food truck owners. It’s important to make sure you have enough cash reserves to be able to handle all issues that come your way as a food truck operator.

Licensing & Regulatory Issues

Navigating all the regulations for each jurisdiction you may be operating your food truck can be the most consistent source of frustration you will experience. Each town and county you may be working in has its own set of laws, regulations, licensing, and permitting as well as guidelines and rules. If you don’t pay attention to this, you will not succeed. 

Equipment Costs

The cost of the food truck and the cost of the equipment and the cost to maintain that equipment will be a constant challenge to address. That’s when equipment financing and other food truck financing avenues are a constant need for your business plan.

Marketing Costs and Efforts

Using social media is a must to get the word out and maintain a following. That may not cost you much in money unless you have to hire someone for graphics and messaging, but the time and effort to drive your message sure will. Without the expertise in this area, this sure can be a drain on time, money, or most importantly business. If you don’t have a robust marketing strategy in your business plan, food truck financing isn’t going to lift you off the ground. The faster you start your advertising and marketing campaign, the better off you’ll be.

Day to Day: Time and Money

The balancing act of all the responsibilities, preparation, and planning of operating the food truck versus the actual time serving food to customers.

Economic Conditions

Food truck owners benefit from growth in consumer spending. During times of recession, the inevitable spike in unemployment leads to declining consumption. When consumer spending is high, consumers are more likely to spend money on dining out, including food truck owners.

High Competition

Competition is a competition. You need to understand how to compete not only with other food truck operations in your market but also with brick-and-mortar restaurants that have similar concepts and cuisines. This does not need to be a bad thing though. Working with others to organize events in your region you operate in is a must — so competition is a double edge sword. Helping each other succeed is the best approach when it comes to food trucks.

Why Does Your Food Truck Need a Business Loan?

Benefits of Food Truck Loans and How They Can Help You

The food truck world is a highly competitive and ever-changing industry. There are a lot of factors that can impact the need for a loan or food truck financing.  Make sure that you know why you need particular financing options before pulling the trigger. Having the right loan on your side at the right time is a must.

Cash Flow

Operating a Food truck is a complicated venture that has a lot of moving parts to it. There are a variety of issues that can impact the cash flow of the business. It’s important to have a business credit facility in place to control the ups and downs of the food truck business and stabilize cash flow, especially for working capital. Various loan options and food truck financing solutions can free up cash flow and start food trucks down the right path.

Truck Expansion/Repairs

So you thought picking the menu and concept was tricky! The Food Truck design and functionality itself is something that has to be well thought out and refined throughout the life of a food truck. Not to mention all the repairs along the way such as HVAC, engine troubles, transmissions to simple things like water service, plumbing, and crazy power steering, the food truck can be both your best friend and your greatest adversary. You may need to be a food truck operator, plumber, electrician, and part-time mechanic all in one. Sometimes buying a new truck is not an option and repairs are the way to go.

Emergencies

It can really be an issue being stuck on the side of the road thinking about all the profits being lost on your way to an event. Having the credit facility at your fingertips can be a game-changer. Food truck financing isn’t just for expanding, sometimes it’s great to have financing options available for unforeseen times.

Advertising/Marketing costs

Social Media and standard marketing expenses will be necessary for the success of your food truck. Without a marketing budget, it will be difficult to compete and build a customer base.

Equipment Purchases

There are always new types of equipment being developed and new items that will demand equipment changes, not to mention the unexpected repair. Equipment financing is available to defray those costs and not negatively impact your balance sheet or cash flow. Financing a food truck requires a lot of equipment and specialized tools, so you’ll need a small business ally by your side.

AdvancePoint Capital has a market place of funding options specializing in manufacturing, agriculture, and retailing across the State of Ohio to service the needs of the small business community. Let’s explorer the 9 most popular funding options for Food Truck owners that are available in the Business Finance Marketplace.

The 9 Best Food Truck Small Business Loan Options

Long Term Business Loans

Long term loans are defined as a business loan with a duration of 2 years or greater in the length of repayment. The main benefits of long term business loans are the length of time of repayment, the ability to access more capital than shorter-term products, and the affordable monthly payments. To finance a food truck in the long run, a long term solution is a good start. Whether it’s for working capital or other food truck financing needs, a long term loan is available to those who qualify.

Product Overview

Rates: Interest rates starting Treasury index plus 1% to 2.5% (currently 5.5%)

Terms: 2 to 10 years

Fees: Origination Fees 0% to 3%

Payments: Monthly or Bi-Weekly payments

Credit Score Standards: Good credit to excellent credit preferred

Processing Times: 3 days to a couple weeks depending on Lender

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Business Line of Credit

A business line of credit is an open revolving line of credit that allows food trucks to draw funds when needed on-demand or make purchases up to a certain credit limit. Business lines of credit require renewal either semi-annually or annually to be extended. Whether you need food truck financing for working capital, start a new venture, or simply to obtain the business credit you need — this is a sound option.

Product Overview

Rates: Principal & Interest Rates start at treasury index plus 1% to 2.5%

Terms: Open revolving line of credit. 

Fees: Origination Fees 0% to 3% 

Payments: Monthly, Bi-Weekly or Weekly payments

Credit Score Standards: Good credit to Excellent credit preferred.

Processing Times: Same day to up to a week depending on lender

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Small Business Administration (SBA) Food Truck Loans

The Small Business Administration (SBA) is a federal government agency that provides programs, guidelines, and loan guarantees to approved lenders for loans. The SBA is not a lender and merely provides a guarantee that gives approved lenders the ability to take on the risk of lending with attractive rates and terms that could not normally be afforded to small businesses. Without SBA guarantees, the approved lender would not be comfortable lending under the terms outlined by SBA. SBA loans are very popular but difficult to acquire due to the requirements, guidelines, and restrictions. AdvancePoint Capital can help guide through the process in a clear, fast, and efficient manner to have the best likely hood of approval. 

Product Overview

Rates: Interest Rates starting at Treasury index plus 1% to 2.5%  

Terms: 3 to 25 years 

Fees: Origination Fees range from 0% to 3%

Payments: Fixed monthly payments 

Credit Score Standards: Good to excellent credit preferred, but all credit considered. 

Documentation: Full Documentation. Application, 6 months business bank statements, two years of business tax returns, year to date Profit & Loss, and Balance Sheet. More documents may be requested upon review.

Processing Time: It can take one week up to a month depending on application volumes, SBA product selection, or other economic conditions.

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Business Credit Cards

Business credit cards are open lines of revolving credit that offer principal & interest rate with a set credit limit. A business credit card is issued, just like a personal credit card that can be used for making payments or purchases. It is not uncommon for food truck operators to utilize business credit cards as well as other food truck financing options as an overall approach. 

Product Overview

Rates: Introductory rates starting at introductory rates of 0% up to 28.99% 

Terms: Open revolving line of credit with a set credit limit 

Fees: Annual fees range from $0 to $500

Payments: Flexible business credit card monthly payments

Credit Score Standards: Must have good to excellent credit and deep credit history

Processing Times: Instant approval to same day for business credit card available

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Short Term Business Loans

Short term loans are those that have a repayment duration of 6 to 18 months. A short-term business loan features a factor rate, not principal & Interest. This option is popular with small businesses that cannot get approved through traditional means because of documentation requirements or credit tolerances. Cash flow and working capital are the best use for these types of food truck financing options.

Product Overview

Rates: Factor rates ranging from 1.09% up to 1.45%

Terms: 6 to 18 months in duration (typically 12 months or less)

Fees: Origination Fees 0% to 5%

Payments: Weekly, Bi-Weekly and in some cases daily Monday-Friday

Credit Score Standards: All credit types considered 

Processing Times: Same day to 24 to 48 hours

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Business Cash Advance

Business Cash Advances (BCA) aka Purchase of Future Sales Agreement that advances future sales at a discount to a business. The food truck is responsible for paying back a fixed payback amount (also known as the specified amount) with the difference between the advance amount and the specified amount is called the “Factor Rate or cost”. A fixed percentage of future overall sales deposits called the specified fixed percentage are the method used for repayment. The payments are collected by an ACH fixed daily or weekly payment deducted from a business bank account based on the specified percentage of future sales. Reconciliation can occur at the end of every month. If the fixed payments taken are more than the set future fixed percentage of sales in the agreement, a food truck owner can request a refund back to the business for overpayment so that the set specified percentage of sales collected for the company matches the sales volumes. There is no term limit with advances. 

Product Overview

Rates: Factor rates from 1.09% up to 1.45% 

Terms: No term limits. Payments continue until paid in full based on specified percentage collection method and are dependent on future sales

Fees: Origination Fees that range 0% to 5% 

Payments: Weekly or daily Monday-Friday Fixed ACH payments 

Credit Score Standards: Poor to Excellent credit accepted. All credit considered.

Processing Time: Same Day to 24 to 48 hours

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Merchant Cash Advance

A Merchant Cash Advance (MCA) is also known as a Purchase of Future Sales Agreement that operates very similarly to BCA’s but the biggest difference is the repayment process, which is connected to the future credit card sales instead of overall sales. No fixed payment is deducted from the business bank account. The set percentage of future credit card sales payment method is used. Advances have no term limit and are connected to future credit card sales. Working capital and cash flow are the most popular uses of Merchant Cash Advance.

Product Overview

Rates: Factor rates 1.09% up to 1.45%

Terms: No term limits (payoff depends on future credit card sales)

Fees: Origination Fees range from 0% to 3%

Payments: Fixed Percentage of future credit card sales as payment

Credit Score Standards: All credit considered from poor, fair, good or excellent.

Processing Time: Same Day to 24 to 48 hours

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Equipment Financing

Equipment financing is used for the purchase of equipment only. The equipment is secured and used as collateral. This type of food truck financing can be structured as a loan or a lease depending on the lender.

Product Overview

Rates: Factor Rates 1.09% up to 1.45% or Interest Rates 4.5%-28%

Terms: 2 to 10 years 

Fees: Origination Fees range from 0% to 3% 

Payments: Monthly fixed payments 

Credit Score Standards: Good to excellent required.

Time Frames: Instant financing, Same Day up to 3 days depending on the lender

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Invoice Financing

Long term loans are defined as a business loan with a duration of 2 years or greater in the length of repayment. The main benefits of long term business loans are the length of time of repayment, the ability to access more capital than shorter-term products, and the affordable monthly payments. To finance a food truck in the long run, a long term solution is a good start. Whether it’s for working capital or other food truck financing needs, a long term loan is available to those who qualify.

Product Overview

Rates: Interest rates starting Treasury index plus 1% to 2.5% (currently 5.5%)

Terms: 2 to 10 years

Fees: Origination Fees 0% to 3%

Payments: Monthly or Bi-Weekly payments

Credit Score Standards: Good credit to excellent credit preferred

Processing Times: 3 days to a couple weeks depending on Lender

Learn More

The fast, convenient and straightforward way to get the money you need for your business – now! Get Your Quote Today by filling out our simple form.

Frequently Asked Questions

Are Food Truck Loans Difficult to Obtain?

It is not difficult to obtain a food truck loan if you have enough monthly sales (greater than $10,000 per month). More than ever before, there are a variety of options, depending on your need, that can fulfill your food truck financing requirements. 

Can I qualify for a Food Truck Loan if I have bad credit?

If a food truck owner has bad credit, there are many food truck loans and alternatives available if you are working with the right business loan originator who specializes in the Food Truck industry. Terms will vary depending on the loan and are linked with risk so expect terms, pricing, and costs to be impacted negatively if you have bad credit.  

Can I get a Start-up Business Loan for a Food Truck?

Yes, SBA loans are the most traditional option available when attempting to acquire start-up financing for a Food Truck business. You can also try to raise capital by looking at a less common option of private lenders or investors for a loan.

Advice, Tips, Warning’s about Business Loans for Food Trucks

Your food truck business financing search should begin with a question: What am I using the money for and how will it benefit the business? Are you aware of all the different types of business financing products that are available in the marketplace? Do you know issues you may run into when getting approved? (Such as; credit issues, cash flow issues, time in business, financial statement issues).

It is always best to take your time in looking through all the options that are available. Always consider a cost versus benefit analysis and what business financing option will work best. 

AdvancePoint Capital helps business owners search in a streamlined process, using our Business Product Marketplace so you don’t end up wasting time or more importantly your hard-earned money. We always say at AdvancePoint that choices give you the freedom and opportunity to make better decisions. If you shop and compare, you will always save!

Why AdvancePoint Capital?

  • Experience– with Non-profits. We have been funding nonprofits for years.
  • Trust-Excellent reviews and feedback from Nonprofits 
  • Loan Specialists –Experiences Business funding specialists who know the nonprofit
  • No cost, no commitment quotes

Products– A variety of nonprofit Loan Products. We don’t just offer what we have, we offer what’s available in the marketplace

How to Apply for Food Truck Financing

Applying for a loan with AdvancePoint Capital is as simple as a 1, 2, 3, 4 process. Start with this online form, then fill out the short application page, wait a few hours for your approval, and then get your money!

The fast, convenient and straightforward way to get the money you need for your business – now!

Get your Quote Today by filling out our simple form.

 

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* All loans made by either WebBank, an FDIC-insured Utah industrial bank, or Bank of the Internet Federal Bank, an FDIC-insured federally chartered thrift located in California. In connection with the loans, the Banks' underwriting conditions and terms apply.