Financing Your Food Truck Business: What You Need to Know

food truck
By Marketing team
December 04, 2019Articles

If you fancy yourself as a chef and have the itch to start your own business, a food truck operation might be just the ticket to becoming the entrepreneur you’ve always wanted to be.

What's great about becoming a food truck operator is that you don't need a fortune to get going. In fact, with the right kind of financing you might be able to launch your enterprise with a surprisingly limited amount of start-up capital.

Because the costs tend to be so low when compared to other business ventures, owning a food truck can prove to be a highly profitable venture. With the right culinary hook to set you apart from the competition, you could potentially make a very comfortable living.

That said, as with any start-up operation, there are still numerous expenses and factors to consider. The following will give you a better idea of the costs involved, along with the various funding options available to help you cover them.


One-time and recurring start-up costs

Needless to say, you won't have much of a food truck business if you don't first have a truck, which far and away will be your biggest investment. In addition to your truck you can also expect to pay for:

  • A cash register and POS (point-of-sale) system
  • A website, as well as any advertising or PR expenses
  • Professional fees (legal, accounting, consulting)

You'll also need to meet additional recurring expenses every month. These include:

  • Credit card costs
  • Payroll, if you choose to hire out for a cook/driver
  • Fuel (both for propane or a generator, and gasoline for transportation)
  • Inventory (food and materials)
  • Insurance
  • Vehicle maintenance
  • Licenses and permits

Some of these costs will vary based on your location. For example, a permit will likely cost you more to park outside the Toronto Skydome before a Blue Jays game than, say, a half-day at the municipal ball park. Regardless, the above are all expenses you'll need to consider when you start putting your business plan together in order to securing financing.

Which brings us to the next important question: what financing options are available?

Fortunately, there are several routes you can take to finance a food truck business. Here are a few of the more pragmatic options.


Financing your food truck business

While it's certainly not out of the question that you could apply for and be granted a traditional business loan to cover your one-time costs, unless you have a spectacular credit score or can prove your business is guaranteed to provide a strong, steady cash flow -- which many food truck businesses simply can't do -- you're going to run into a lot of resistance from traditional lenders. But don't let that stop you -- after all, there's more than one way to skin a cat, as the old adage goes.

Instead, consider one of the following options.


  • Leasing

If buying a truck and the kitchen equipment you need to operate your business up front isn't a realistic option for you right now, you might want to consider leasing a fully-equipped food truck. It may be more expensive in the long run, but leasing greatly reduces your up-front costs.

If you're short on start-up capital, by leasing your food truck you can launch your business with very little money in the bank, and should it take off, you can reinvest those profits towards purchasing your own vehicle at the end of the lease. You might even decide to purchase the vehicle you've been leasing and come to know so well over all that time.


  • Merchant cash advance

Even if you have a weak credit score you should be able to secure a merchant cash advance to finance your food truck business. That's because merchant cash advance providers evaluate credit criteria differently than other lenders.

This type of financing enables business owners who accept credit card payments (or have other payment streams) to obtain an advance of the funds regularly flowing through their business' merchant account. Essentially, you're selling a portion of your future credit card sales so you can acquire that cash immediately.

The only problem with this type of financing is that it's typically pricey, sometimes higher than triple digit annualized interest rates. The trade-off is that merchant cash advances are not that difficult to obtain and the money usually arrives very quickly.


  • The Canada Small Business Financing Program

One excellent way to secure funding for your food truck business is through The Canada Small Business Financing Program. So long as your gross annual revenues work out to $10 million or less (and it's a pretty safe bet your food truck isn't going to generate anywhere near that kind of money straight out of the shoot), you can apply for a government-backed equipment loan for your start-up.

If your application is accepted, you may be allowed to borrow up to $350K to purchase equipment, with 85% of that amount secured by the federal government. The only real catch to these loans is that you typically need stellar credit to qualify. Nevertheless, it's an option well worth investigating. For more information click here.


  • Asset-based loans

This type of loan gives small business owners the ability to obtain working capital by using their personal or business real estate as collateral for financing. Typically, asset-based lenders will provide up to 75% of your property’s value.


  • Alternative lenders

If you don't qualify for a traditional bank loan or government-secured funding, you'll likely find that alternative commercial lenders will be a lot more welcoming of your business. These types of institutions typically offer more flexible terms than the big banks. Countless Canadian businesses have been funded this way.

As you can see, there are many different considerations and ways to finance a food truck business. Because the start-up costs are so minimal when compared to a brick and mortar operation, one way or another, with a little leg work you should have no trouble securing the funding you need to get your food truck business up and running.


Whether you need to finance your inventory, lease equipment or take out a loan, Hitachi Capital Canada can help your business grow. Contact us to find out more.