by Joe Camberato, CEO of National Business Capital
Even in a down economy and spiraling inflation, everyone still needs to eat, and food trucks have surged in popularity as consumers seek out a quick, inexpensive, on-the-go meal option. Food trucks are also an easy way for entrepreneurs to enter the restaurant business without incurring the costs and risks of running a full-fledged eatery.
There are over 35,000 food trucks currently operating nationwide – and demand is growing. If you’re looking for a potentially profitable business that offers immediate cash flow and a significant degree of freedom to be your own boss, here are a few steps to take before diving full force into a food truck business.
It Starts with the Prep Work.
Like whipping up a tasty dish, starting a food truck business requires a solid “recipe” at its foundation to ensure success. In this case, the recipe is your business plan. In order to formulate it, you’ll have to do a lot of research about the food truck business before doing anything else.
First, determine if a food truck business would be successful in your area. What’s the competition like? What are they serving? What parking areas are their established “turf”? Can you offer something different and carve out your own base of customers? You’ll need to know the business landscape thoroughly if you hope to succeed at this gig.
Second, you’ll need to find out what specific food service laws and permitting regulations are enforced in your locale. Securing the proper permits and passing all the inspections is time-consuming and costly, so make sure you know all the ins and out before fully committing to your plan.
Third, figure out what you’re going to do for a kitchen. You generally can’t buy a food truck off the car lot; Each is custom outfitted for the particular food production it will be performing. Can you buy an existing truck and take over its route? Or will you be starting from scratch? Identify what kind of trucks are available, their costs, and who has a solid reputation for customizing these vehicles for food truck use.
Once you’ve done your research and are confident your food truck business plan is viable, it’s time to look at financing options.
Financing Your Food Truck Dream
Launching a food truck business typically costs between $50,000 to $250,000, with the vehicle purchase, conversion, installation labor, and kitchen equipment being your steepest upfront costs.
Financing isn’t always easy to get. Most traditional banks designate food truck operations as a “transient business.” There’s no brick-and-mortar shop tying you to the community – you could literally drive away from the business. This reality makes securing a traditional loan a little more challenging.
There are many factors to consider, so it’s best to shop around for the finance deal that best suits your needs. If you already own a restaurant and are merely expanding your business with a food truck, there’s a good chance you’ll qualify for either an equipment loan or a working capital loan.
For an equipment loan, you’ll typically need to provide a small down payment, with your food truck itself serving as collateral for the loan.
Working capital loans are short-term loans designed to give you a shot of cash to get started. Use it to purchase inventory ahead in anticipation of a busy period or, conversely, to get you through a slow time period, such as winter when sales may be slow or if you have to go on hiatus entirely.
Consider Alternative Lending and Merchant Capital Financing
If the bank is giving you trouble securing financing, merchant cash advances can represent a viable option. This form of alternative lending is essentially an advance on your food truck business’s future sales. In other words, you’ll receive a cash injection now, which you’ll repay as a percentage of your future revenue.
Merchant cash advances work incredibly fast and are best for short-term financing needs. Your credit score will also have less weight when you apply for this type of financing.
Ready to Begin your Food Truck Journey?
The food truck business can be a terrific full-time job or even a profitable weekend side hustle. When starting any venture like a food truck, it’s best to consult a business advisor. In addition, visit the food trucks already operating in your area and find out if the owner is willing to talk about the process. Lock down your business plan, secure your financing, convert your truck, and get cooking!
Joseph Camberato, CEO of National Business Capital, developed a passion for business growth early in his career. What started out of his spare bedroom in 2007, has blossomed to 100 employees and multiple locations. Joe and his team have secured over $1 billion dollars in financing for thousands of clients nationwide, making NBC a leader in their industry and recognized as one of the top alternative finance originators in the country.