In 2014, the film Chef was released – a heartwarming story of an acclaimed Michelin-starred chef who takes his culinary skills on the road and forms a stronger bond with his family.
We can’t say for sure whether Chef influenced a new crop of food truck entrepreneurs, but statistics show that the food truck industry boomed between 2015 – 2021, with an annual growth rate of 7.5%. Coincidence? Maybe, but a rather tasty one.
However, it’s also known that around 60% of new restaurants fail within their first year – and this number climbs to 80% by the fifth year. So if you’re looking to expand your food truck business, congratulations on being one of the successful few!
In this article, we’ll take a look at financing options for food truck entrepreneurs to grow their operations, and why a personal loan could be a rather solid option for you.
Average Cost of Expanding a Food Truck Business
There are a lot of variables when it comes to expanding a food truck business, but we can roughly determine the average cost based on what you want to accomplish. Are you looking to purchase more trucks for targeting more locations, or turn your food truck brand into a brick-and-mortar restaurant?
For opening a brick-and-mortar restaurant, the average cost ranges from $175,500 – $750,000. That’s most likely one of the reasons you initially started a food truck business, with their much lower startup cost of around $28,000 – $114,000. But since your food truck business is enjoying success and it’s time to expand, you likely have a good bit of savings to spend on a restaurant venue.
On the other hand, the capital investment of buying more food trucks is roughly equivalent to what you spent on starting the business in the first place, though with a few additional expenses like hiring more staff, additional marketing efforts, and additional parking licenses for each food truck.
Here’s a good video about the costs of starting a Food Truck Business:
Reasons Why Using a Personal Loan For Your Food Truck Business Funding Can Be a Good Idea
Ordinarily, business loans are best for funding business ventures. However, using a personal loan sometimes has more advantages than a business loan.
Below are some of the advantages personal loans have over business loans.
Faster to Process
Generally, personal loans are processed faster than business loans.
Business loans sometimes take several months to be approved because lenders spend a lot of time verifying the client’s information, such as their annual business revenue and profit report, business and personal credit scores, debt-to-income ratio, debt-service coverage ratio, employee identification number (EIN), etc.
Other times, the delay is caused by back and forth negotiations of the loan contract terms.
This advantage can be summed up in the fact that if you need a swift loan to fund your business and you do not want to wait for a business loan that may take a long period to be approved, you could use a personal loan.
Attractive Rates
Apart from being faster to process, personal loans sometimes have better rates than business loans, meaning personal loans come with cheaper interest rates. However, these cheap interest rates only apply to those with high credit scores, meaning people whose credit report shows they are creditworthy.
Fintech companies like SoFi offer affordable personal loan interests. SoFi’s interest rates are some of the best; they offer as low as 6.99% interest rates on a $5k-$100k personal loan.
In summary, if you have a good credit score and are willing to risk it to fund your food truck business, you should take a personal loan.
Accessibility
Business loans aren’t easily accessible to those who just started their food truck business because they lack most of the requirements like a business credit score, annual business revenue, and profit report needed to qualify them for a business loan.
However, personal loans are available to anyone who can generate their credit score, irrespective of how low such a score is.
No Collateral is Needed
Personal loans require no collateral, unlike business loans. However, not every personal loan lacks the requirement of collateral. It only applies to unsecured personal loans. Rather than collateral, these types of loans rely on the borrower’s creditworthiness.
Provide a Lump Sum
Small-scale business loans do not always provide a lump sum.
Rather than a lump sum, business loan lenders sometimes require the borrower to present invoices or receipts to prove the stage of the business plan the loan was approved for had been achieved before another round of funding can be released.
However, personal loans are always released in a lump sum. In summary, a personal loan is best for you if you need a swift lump sum of money to fund and scale your food truck business.
