Think of street food and you think of delicious dishes served for immediate consumption with just the sky above your head.
Fast-food served outdoors is big business in the UK and king of the street food industry is the food truck – a mobile kitchen selling everything from fish and chips, to BBQ, tacos, wraps, rice bowls, curries, smoothies and empanadas. Growing at a meteoric pace, the UK street food industry is worth more than £600million per year, a statistic that is drawing more entrepreneurs to this niche area of hospitality. However, launching a food truck can be expensive and even well-established operators can suffer from seasonal low points or when the weather turns to rain or snow. Securing adequate funding for your food truck is therefore key to long-term success. Read on to find out more about food truck finance and how it can keep your mobile fast-food business firmly on the road.
Food trucks are a common sight in many US cities, but until recently, they were a rarity in the UK, with menus limited to basic foods such as hamburgers, ice creams, and hot dogs. However, an explosion in take-away food before, during and after the COVID-19 pandemic has seen a boom in food trucks on British streets and now they offer food from every corner of the globe. Popular with sports fans, events and concert goers, as well as office workers and the UK’s many tourists, food trucks can be very profitable businesses, benefiting from low overhead, an ability to go wherever the customers are, and able to change their food offerings to suit consumer tastes with minimal cost and disruption.
Today there are more than 7000 food trucks operating in the UK and the mobile street food industry is experiencing growth of 20% per year, making food trucks one of the most successful sectors of the hospitality trade.
Whether you wish to buy an existing food truck business, start from scratch with a new or used van, pay for equipment, cover day to day expenses, or pay franchise, registration or other startup costs, there’s a loan for every food truck owner and entrepreneur.
Popular with newcomers to the food truck industry and established food truck owners who wish to borrow money without incurring debt on their business, personal loans can often be obtained quickly and with less demand for paperwork than commercial funding. Your personal credit and finances will be key to securing the funds you need. Personal loans are usually more expensive and the sums of cash available smaller than may be obtained with most business loans.
Typical personal loans:
Commercial finance for small businesses comes in a variety of shapes and sizes. Borrow from as little as £1000 up to £5million. This type of finance is typically more economic and with better terms and conditions than personal loans.
Common small business loans:
If you wish to buy a new or used van to convert into a food truck, a finance lease will help you secure the vehicle you need with a lower deposit and lower monthly payments than a standard hire purchase agreement. You have the right to buy the vehicle outright at the end of the contract period for a pre-agreed sum. May include an excess mileage surcharge. Additional security not required.
Also called a revolving line of credit, this type of business lending functions like a standard bank overdraft but is provided by an independent lender. Dip into the facility to borrow cash on an ‘as-needed’ basis. Borrow up to a pre-agreed maximum, then as you pay funds back, you can borrow them again and again during the term of the agreement. Ideal for working capital, or to cover sudden and unplanned expenses. (Such as your food truck needing emergency repairs). Security may be required.
Fitting out a food truck with cooking and food storage equipment can be expensive. Plus, you may need extra freezers, refrigerators and food processing machinery back at base. Use a finance lease, or asset-finance to buy this equipment over time. Pay for the machinery as you use it to make money for your business. In most cases, no additional security is required.
Microloans have relatively short repayment periods, offer small loan amounts and little or no security is required. Available from peer-to-peer lending websites, or from specialist small loan providers, (such as pay day lenders), microloans are typically more expensive than other forms of borrowing.
Preparation is key. No matter if you are seeking funds to buy a food truck, cover everyday expenses, or pay your tax bill, the lender will need full business details, and in many cases, a detailed business plan. Additional to these core requirements, most lenders will also seek some, or all, of the following information:
Although many lenders to the hospitality trade prefer to work with seasoned food truck operators, a lack of previous experience in the industry may not be a hurdle for newcomers if their business plan, financial projections and available security are strong enough.
After hard collateral as security, your business plan is the most important element of any loan application. Lenders will be seeking solid information. This includes accurate financial forecasts, a feasible marketing schedule, details of partners and co-directors, and an exit strategy that reveals the long-term goal of the business. Borrowers who may struggle to assemble this document are advised to seek the services of a hospitality business-development professional before applying.
Apart from startup loans and some working capital finance, such as merchant cash advances, there are few food truck loans that do not require a deposit (security) from the borrower. This may be provided as a cash input, or in the form of collateral, such as property and hard assets. The deposit sum will vary depending on the type of loan provided and the borrower’s financial situation.
Some lenders may ask for a personal guarantee by the business owners or directors to secure the loan. If they do, they will check their personal finances and credit scores. The stronger they are, the better. Don’t get caught out by an error on your credit report, always check your business and personal credit scores before you apply.
Funding for food trucks is a niche financial area, with differing rules of application. Entrepreneurs and food truck owners seeking this type of funding may find themselves forever searching and making applications to lender after lender.
The delays this can create could cause you to lose business and leave your food truck vulnerable to the competition. Instead, working with a broker, who can access food truck loans from a wide range of lenders is a better way to go. No more cold calls and endless demands for information. Even if you’ve been turned down elsewhere or have bad credit, simply tell us what you need and leave the rest to us.
Don’t get left behind in the UK’s food truck craze. Register with Swoop to find the best rates, the best terms and the best loans for your food truck business.
Swoop was amazing! I was looking for refinancing and they were straight onto finding me the best possible option. I would highly recommend them.
Owner, F45 Cambridge
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