If you’re looking into financing a food trailer or food truck, here’s a detailed breakdown of your options and what lenders look for.
WHAT YOU CAN FINANCE
Here are common costs that lenders will cover when you’re financing:
- Food Trailer or Concession Trailer
- Equipment financing for just the kitchen gear or trailer rather than a full business loan.
- In some cases, working capital
FINANCING OPTIONS
Equipment loan – You can apply for equipment loans. The trailer will be your asset or collateral. You will need a registered business name and a business bank account.
Business line of credit – You can apply for a business line of credit (You will need a business legal name, tax ID and a business bank account. Requires at least 2 years of business history, proof of revenue, and 650+ credit score.
Microloan / startup loan: For newer businesses with little history; smaller amounts.
Lease-to-own / trailer leasing: You lease the trailer with an option to buy; useful if you want lower upfront costs.
Line of credit / working capital financing: For ongoing operations rather than major purchase.
Home equity / personal asset backed financing: If business credit is weak, some entrepreneurs use their home equity or personal assets.
LENDING REQUIREMENTS
These are the typical criteria you’ll encounter:
Credit score: Many lenders want a minimum of 650 credit score. If your credit score is not great, this site gives you access to your credit report and shows you what to do to improve your credit score: https://www.creditkarma.com/signup
Business history: Some lenders require at least 2 years in business.
Start-up busienss: If you’re brand new in the industry, then you are considered a start-up, which comes with more strict lending requirements. Lenders usually require a credit score of 650 or greater. Requires 4+ accounts that have 24 months payment history or longer with similar asset values. (Student loans are not considered valid trade lines).
Down payment 10% to 20% is very common. Althought, it varies depending on your financial criteria, and it might be less than 10%.
Proposal or Quote from a reputable trailer builder such as Concession Nation. (Usually after the pre-approval process).
Your business plan: Lenders might want to see that you understand the mobile food business and have a realistic plan.
Benefits for lease to own option:
Less Cash Down – Save your limited cash for other areas of your business, like expansion, improvements, or marketing
Accelerate ROI – Rather than paying one lump sum for your equipment, make smaller payments while the equipment generates revenue
Customize Your Terms – Set customized payments to match your cash flow and even seasonal income fluctuations
Section 179 – Our programs qualify for Section 179 which may allow you to deduct up to 100% of the equipment cost. Please discuss with your accountant to fully understand how it would apply to your business.
Usually, offers a lease to own financing option with a $1 buy-out at the end of the term so you will own the trailer outright.