One of the biggest expenses you’ll have when starting or expanding your food truck is in buying or leasing the equipment you’ll need -- which might include your single biggest piece of equipment, the truck itself.
Buying your equipment outright will always be a better option than leasing the equipment. While buying is more expensive in the short term, you’ll pay significantly less in the long term, since not only will you not be paying interest on the equipment, but you also won’t have to give it back.
However, there’s a third, often better option available to you: loaning the money to buy the equipment. You’re probably still paying interest on a loan (although not always, which we’ll get to in a second), but getting the right loan for your food truck equipment means that you’ll be paying less overall than if you’d leased it. It’s a good bridge between the two for people who have trouble getting all the money they need up front, but still want to remain the full owners of their equipment.
If you already have a financing option picked out, that’s great -- do as much research on it as you can before moving forward. But if you’re still not sure about financing options in general, here are 3 steps to help you understand equipment loans for food trucks.
Your financing options are going to be pretty limited if you’ve got bad credit. But as long as your credit is at least in the mid-range or higher (typically around 630 or more), you should be able to get your hands on a business credit card.
Business credit cards work more or less the same as regular credit cards but with advantages that pertain to buying equipment or supplies for your business, including options that can help you avoid accruing interest on your purchases.
You can also use a personal credit card to finance and equipment purchase, but depending on how pricy the equipment is that you need, you might not have a high enough credit limit to cover it.
The other financing option for those with fair-to-good credit is to get an equipment loan from a bank or credit union.
The better your credit, the more likely it is that you’ll have lower interest rates, but since equipment loans are secured you should have an easier time securing low-interest loans in the first place.
A great option for financing equipment for food trucks, regardless of your credit score, is to crowdfund the money you need.
Most crowdfunding websites work through raising donations in various tiers, typically in exchange for a product or some other reward benefit for the project’s backers.
Other crowdfunding sites (like LoanWell, the one you’re on right now) work by allowing project supporters to contribute to no-interest loans paid back over time to all of a project’s backers. Going through loan-based crowdfunding is a good option if you’re worried about how much you could convince your network to donate to you, but feel confident that your supporters would lend the money to you instead.