Insider Tips: Food Trucks Loans

Starting a food truck business can be an exciting venture, but getting the right funding can sometimes feel like a maze. Food trucks require more than just the truck itself – think equipment, licensing, and marketing to get your brand on the road. Whether you’re just starting out or looking to expand, there are various loan options available. Here, we’ll dive into the different types of loans, from SBA loans to equipment financing, giving you an idea of what might work best for your food truck business.

Hint: Insider Tips below!

IncBook: Loan Options for Food Trucks
Loan Type	Rates	Loan Amounts	Pros	Cons
SBA 7(a) Loan	5.5% – 8%	$50,000 – $5 million	Low interest rates Long repayment terms (up to 25 years) Backed by the government	Requires strong credit score Lengthy approval process Collateral may be required
Equipment Financing	6% – 16%	Up to 100% of equipment cost	Finances truck and kitchen equipment Quick approval (as fast as 24-48 hours) Equipment acts as collateral	Higher rates for newer businesses Limited to equipment purchases
Short-Term Loan	8% – 30%	$5,000 – $250,000	Fast funding (as quick as 24 hours) Great for working capital needs No need for perfect credit	Higher interest rates Short repayment periods (3 to 18 months) May create cash flow pressure
Business Line of Credit	7% – 25%	$10,000 – $500,000	Flexible use of funds Pay interest only on what you borrow Reusable once paid down	Variable interest rates Can be difficult to qualify for higher limits
Merchant Cash Advance (MCA)	1.1 – 1.5 factor rate	$5,000 – $200,000	No fixed payments – repayment based on sales Good for fluctuating revenue No collateral required	High effective interest rates Daily/weekly repayments strain cash flow
Crowdfunding	N/A	$1,000 – $500,000	Can raise funds without giving up equity Builds a customer base before you launch No need to repay the funds if you reach your goal	Requires a strong marketing plan Success depends on campaign visibility
Peer-to-Peer (P2P) Lending	6% – 36%	$2,000 – $500,000	Lower barriers to entry compared to banks Can access funds quickly No traditional collateral needed	Higher interest rates based on risk Requires strong personal financial history
Microloans	7% – 18%	$500 – $50,000	Ideal for new businesses Low loan amounts for startups Easy to qualify with flexible terms	Limited loan amounts Higher interest than traditional bank loans
Vendor Financing	Varies by vendor	Up to 100% of vendor costs	Direct financing for food truck equipment Some vendors offer 0% financing options Helps manage large upfront costs	Limited to vendor’s equipment offerings Higher overall cost due to vendor markup
Personal Loans	5.99% – 36%	$2,000 – $100,000	No collateral required Fast approval process Can be used for any business purpose	Higher interest rates for lower credit scores May not be sufficient for full food truck setup
Credit Cards	12% – 29%	$1,000 – $50,000	Immediate access to funds Great for small purchases and emergencies Rewards and cashback options	High interest rates if balance is not paid in full Limited by credit limit

Insider Tips

🎯 Leverage Seasonal Peaks:
Food trucks often make the bulk of their revenue during certain seasons or events. When applying for a loan, use past sales data from peak seasons to show lenders your potential for revenue growth. For example, emphasize how you can repay faster due to event-based surges like food festivals or street fairs.

🛠 Utilize ‘Retrofit Financing’:
Instead of purchasing an entirely new truck, consider applying for a loan to retrofit a used truck. This can dramatically lower the overall loan amount while still allowing you to create a high-end, custom kitchen on wheels. Some lenders are more flexible with retrofit loans as the cost of modifications is often lower than purchasing new equipment.

🌍 Play Up Your Local Sourcing:
Many lenders are increasingly supportive of eco-friendly and locally sourced businesses. Highlight that your food truck sources local produce, uses sustainable packaging, or has a reduced carbon footprint. You can get better loan terms from green lenders or community banks that support local economic initiatives.

📅 Event-Based Repayment Plans:
Some lenders offer flexibility in repayment schedules. If you have clear data on high-revenue events (e.g., summer concerts, sports events), negotiate for repayment terms based around your busiest times. This helps you avoid cash flow issues during slower months while still making strong payments when business is booming.

🍴 Partner with Commissary Kitchens:
When applying for a loan, show that you’re using a commissary kitchen for food prep and storage. Lenders like to see that you have a solid plan for efficiency and logistics, and working with a commissary can also lower your operating costs. It’s a great way to reduce the perceived risk of lending, especially for new food truck businesses.

🧾 Break Down Your Profit Margins:
Food truck owners should break down their profit margins in a granular way when talking to lenders. Show lenders how each menu item is a potential revenue source by calculating cost per item sold versus revenue. This detailed data can give you an edge, showing that you have a clear understanding of your margins, which builds confidence in your business’s profitability.

🚚 Location Contracts Are Gold:
If you’ve secured a high-traffic location, such as a spot outside a stadium, university, or downtown area, make sure to include this in your loan application. Contracts for prime spots act like collateral in the lender’s eyes since they ensure consistent foot traffic and revenue, which can help you secure better terms or a higher loan amount.

🛢️ Fuel Efficiency Upgrades Can Help:
If you plan to upgrade your truck for fuel efficiency, mention this in your loan application. Energy-efficient vehicles or those with green certifications might qualify you for lower interest rates, especially if you’re targeting a lender with a focus on sustainability. Plus, it shows you are planning for long-term operational cost savings.

💡 Build a Strong Digital Presence:
Lenders love to see a well-thought-out marketing plan. If you have an active social media presence or are known in your community, highlight this in your application. Mention how you use platforms like Instagram to announce your locations, or how you’ve built a following of loyal customers. A strong online presence equals more consistent sales, which is a good sign for any lender.

👥 Build Vendor Relationships:
Highlight any relationships with key food vendors or supply chains. If you’ve been able to lock in discounted rates on ingredients, equipment, or other supplies, this can reduce your operating costs and improve profitability. Mentioning these partnerships can give lenders added confidence that you’ve built a reliable support network around your business.