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How to finance a food truck
Compare food truck financing to find the right fit for your business.
There are a number of different ways you can get financing for your food truck in Canada. Learn more about how food truck financing works, and compare food truck loans and lenders to find the best option for your unique set of needs and budget.
Food truck financing options
There are at least 8 different food truck financing options you can explore if you want to finance a food cart in Canada. From commercial vehicle loans to small business loans, we take you through each one so you can find the perfect fit for your situation.
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1. Commercial vehicle loans
- How it works: Similar to equipment loans, a vehicle loan is based on the value of your food truck, which your lender uses as collateral. However, you likely won’t be able to buy your first food truck with a vehicle loan. New food trucks can run between $80,000 and $200,000 – and lenders typically like to see that you’ve had some experience in the industry before offering that much money.
- What can I use it for: You may be able to use a vehicle loan to purchase a second or third food truck if you can prove to your lender that your business is making a reasonable profit.
- How much can I borrow: You’ll usually be able to borrow the full amount or close to it with vehicle loans. It depends on your lender and how successful your food truck is.
- How to apply: You’ll need to find the food truck you want to buy and then apply for financing from a bank, online lender or a dealership.
2. Small business loans
- How it works: This type of food truck financing allows you to borrow a lump sum of money and pay it back in fixed installments, usually over a period of 5 to 20 years.
- What can I use it for: You can take out food truck loans to pay for most expenses, including employee salaries, vehicle repairs or equipment purchases.
- How much can I borrow: You may be able to borrow anywhere from $5,000 to $500,000 depending on personal factors such as your credit score and income.
- How to apply: You can contact any bank or online lender that seems like a good fit to fill out an application for financing.
Compare lenders that offer business loans to finance a food truck
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3. Canada Small Business Financing Program (CSBFP) loans
- How it works: CSBFP loans let you borrow money that’s backed by the Canadian government. This means that if you can’t pay back the loan for some reason, the Canadian government will assume and repay a portion of the debt you owe.
- What can I use it for: You’ll be able to use the money you borrow to purchase or improve business assets such as your food truck and equipment. You can’t use it to fund day-to-day operations like payroll, inventory or other expenses.
- How much can I borrow: You may be eligible to borrow up to $1 million.
- How to apply: While CSBFP loans are backed by the government, you still apply for them through your bank or alternative lenders. You just need to speak to your provider for a CSBFP-specific application.
Ins and outs of the Canada Small Business Financing Program
4. Merchant cash advance
- How it works: Merchant cash advances let you pay back the money you borrow based on how busy your food truck is. Your lender will simply take a percentage of your credit and debit card sales until your food truck loan is paid back.
- What can I use it for: You can take out a merchant cash advance to pay for any expenses related to your food truck business.
- How much can I borrow: The amount you can borrow will depend on your sales history. Many lenders will give you as much as 20% of your average profits.
- How to apply: You’ll need to find a bank or online lender that offers repayment based on sales. Then, you simply fill out a merchant cash advance application and set up a contract for how much you have to repay each month.
Learn more about merchant cash advances
5. Business line of credit
- How it works: Business lines of credit let you hold money in a separate account until you need to use it. You don’t pay interest on the money until you physically take it out to pay for a purchase, but it’s always readily available.
- What can I use it for: You can take out a business line of credit to pay for any of your food cart financing needs, making this one of the most versatile options available.
- How much can I borrow: You may be able to borrow anywhere from $2,000 to $500,000 in food truck financing, with repayment periods of six months to a few years.
- How to apply: You can apply for a business line of credit with most banks and online lenders. Find the best fit for your business and apply by filling out an application.
Get a business line of credit to fund ongoing expenses
6. Microloans
- How it works: You may be able to access a small amount of funding with a microloan if your food truck is new or you’re just getting it off the ground.
- What can I use it for: You can use a microloan for smaller expenses such as topping up your inventory or buying a new piece of equipment.
- How much can I borrow: Microloans can start as low as $1,000 and are typically repaid over three months or more. They usually come with low interest rates compared to other types of food truck financing.
- How to apply: These food truck loans are typically available with credit unions or non-profit organizations. Two examples of these organizations are the Access Community Capital Fund and the Community Futures Network of Canada.
7. Equipment loans
- How it works: This type of financing lets you borrow money specifically to pay for equipment. It’s often secured by the equipment once it’s purchased, which means your lender can repossess it if you default.
- What can I use it for: You’ll only be allowed to use this money to purchase equipment for your food truck.
- How much can I borrow: Up to 80% of your equipment’s value – sometimes more.
- How to apply: You’ll want to find the piece of equipment you want to purchase and approach your bank or alternative lender to fill out an application for an equipment loan. They will usually assess the value of the asset and give you a portion of the money you need to purchase it.
8. Asset-based loans
- How it works: These loans are very similar to secured loans, except they use your business assets as collateral to secure the money you borrow. This means you can borrow against your food truck or your equipment if you have equity in your assets.
- What can I use it for: You can borrow against your assets for any reason, and there doesn’t seem to be any restrictions for how you can spend the money you borrow.
- How much can I borrow: A lender may grant up to 90% of the face value of your assets, though this number will fluctuate based on which provider you go with.
- How to apply: You can fill out an application with banks or online lenders specialized in secured loans.
What is asset-based financing?
Food truck financing options for borrowers with bad credit
You can also look into these alternative forms of food truck financing to finance a food cart in Canada, especially if you can’t qualify for traditional financing due to bad credit.
Crowdfunding
- How it works: Crowdfunding is the process of raising money from a large number of people in order to fund your food truck. This could be a good approach if you have a lot of friends or customers willing to invest in your business.
- What can I use it for: You can use crowdfunding money in any way you please, whether it be to buy a food truck, replace an oven or hire a new staff member.
- How much can I borrow: There’s no set limit on the amount of funds you can raise through crowdfunding, though the platform may impose a maximum limit. It will also impose fees or take a percentage of the money you raise to pay for its services.
- How to apply: You’ll need to set up a profile with a crowdfunding platform, set a fundraising goal and link your bank account. You can then share your appeal with your friends, family and customers to raise the money you need.
10 crowdfunding sites for Canadian small businesses
Leasing
- How it works: With leasing, your lender buys the equipment and leases it back to you for a set amount of time. You’ll pay a monthly payment and may be able to purchase the equipment for a reduced price at the end of your contract. You’ll usually sign a lease for 3-10 years and you won’t own the vehicle or equipment when your lease is up.
- What can I use it for: You can usually lease your food truck or the equipment you need to run your business. You then return the assets at the end of a specific term.
- How much can I borrow: You don’t borrow money with leasing as it’s not a form of food cart financing. Instead, you’ll pay a monthly fee to own/operate a third-party food truck or any supplementary equipment, and you’ll pay less upfront to start your business.
- How to apply: You’ll need to fill out an application with a lender willing to purchase the equipment you need and lease it back to you. You may also be able to apply for leasing directly from an equipment supplier.
Renting
- How it works: Renting a food truck is very similar to leasing one, except it’s typically done for more short-term jobs. For example, you might rent a food truck to work a certain event, but that food truck won’t stay in your possession and you won’t be locked into a long-term lease.
- What can I use it for: Renting applies to vehicles and equipment, and can be used to reduce the upfront costs of maintaining a full-time food truck.
- How much can I borrow: You don’t borrow money with renting, instead you pay a monthly fee to own/operate a third-party food truck or any supplementary equipment you need.
- How to apply: You can apply to rent a food truck with a dedicated food truck rental company. These exist in a handful of large Canadian cities, such as Toronto, Montreal and Vancouver.
Where can I get food truck financing?
You can get food truck financing from a number of different lenders:
- Bank financing. Bank financing is provided by Canada’s Big Five Banks and other major financial institutions. This type of food truck financing often comes with higher interest rates and you may need a higher credit score to qualify.
- Providers include BMO, TD Bank, RBC, CIBC, Scotiabank, Canadian Western Bank and National Bank.
- Credit union loans. Credit unions offer food truck financing that’s a bit more flexible than the big bank loans. You’ll typically need to be signed up with the credit union you want to borrow from.
- Providers include Meridian, Servus, Vancity, Connect First, Conexus, First West, Steinbach, Alterna Savings and Coast Capital Savings.
- Online loans. Online loans are offered by online and alternative lenders. They usually come with fewer eligibility requirements than bank financing, and you may even be able to qualify with less-than stellar credit.
- Providers include SharpShooter, Loans Canada, Journey Capital and Driven.
How to decide which loan is best for my food truck business
You might want to use these types of financing to cover the following expenses:
| Inventory | Merchant cash advance, line of credit or business loan |
| Equipment | Equipment loans, business loan, CSBFP loan, microloans, leasing or renting |
| Food truck | Business loan, CSBFP loan, vehicle loan, crowdfunding |
| Repairs | Merchant cash advance, line of credit, microloan |
| Payroll | Merchant cash advance, line of credit |
What do I need to apply?
Since food trucks are highly seasonal, some lenders might want to see more documentation than they would from your standard restaurant. While it depends on the lender and the type of financing you’re applying for, you might expect to provide the following documents:
- A business plan. This is where you get to make a case for your business and convince the lender you’ve thoroughly thought through all the factors that will help you to create a successful business.
- Financial projections. These are particularly important if you’re applying for a microloan when you’re just getting started — it shows that your business will likely be able to pay off its debt on time.
- Personal financial statement. Many lenders require business owners to back their loan with a personal guarantee, meaning that you’re responsible for repaying it if your business fails. A financial statement proves your ability to repay.
- Licenses and permits. Every city has its own rules when it comes to licensing and permits — and your lender will likely want to see that you’re following them before funding your business.
What challenges might I face as a food truck owner?
There are a few challenges that you may want to keep in mind as you apply for food truck financing and begin to think about repayment.
- High startup costs. You’ll need to think about the high cost of purchasing your food truck and all the equipment you’ll need to prepare food. Food trucks can cost up to $200,000 if they need to be retrofitted and customized to meet your needs. You should make sure to plan for every expense when it comes time to apply for financing.
- Slow days. You might have slow days due to bad weather or too much neighbouring competition. This can eat into profits and you’ll need to keep it in mind when planning your forecasted revenue for food truck loan repayments.
- Difficulty getting permits. You could have difficulty getting the permits you need to set up in a particular location, especially if there’s lots of competition in town. Apply for permits early and know how many days you can operate your business before figuring out which food truck loans to apply for.
- Payment methods. You may want to use debit or credit cards for payment, especially if you want to sign up for a merchant cash advance. This will let you track incoming payments and budget for repayments automatically.
5 tips for starting a food truck
- Find a commissary. A commissary is a kitchen that meets health department standards where you can prep your food and wash dishes outside of the truck. It’s at a separate location and can save you a lot of time and effort during the lunch rush.
- Try catering. Catering private events and festivals is a great way to get your name out there and build a fan base. Plus, the media coverage at festivals and gatherings might give you an extra boost.
- Know the law. Familiarize yourself with the long list of regulations you’ll need to follow in your city so you don’t get shut down.
- Become a social media expert. Using Twitter, Instagram and Facebook are great ways to build and maintain your fan base by engaging with customers and offering coupons.
- Keep it simple. Having a simple but creative menu can keep costs down while ensuring that your staff and inventory needs are easier to manage.
Bottom line
There are many different types of food truck financing to choose from depending on what you need the money for. Compare what types of food truck loans are available and learn when you might want to tap into each one for specific expenses.
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