To start your own street food business, you don’t need special vocational training, but you do need capital. After all, the start-up costs and investment costs as well as the running costs and also a buffer should be covered. Without money, your idea of your own food truck is just an idea.
In order to receive capital at the start of your career as a food truck owner, there are numerous financing options available to you. It doesn’t always have to be the classic bank loan, as a food truck founder a number of different financing options are available to you!
Which type of financing is suitable for your business idea depends on the various advantages and disadvantages of the respective form, which you should weigh up carefully in advance.
Food trailer financing: equity vs. debt capital
Your starting capital consists of your own capital and outside capital. To ensure that you are financially secure, you should calculate your capital requirements generously so that you do not run into financial difficulties in the event of unexpected events. Subtract your own capital from the calculated sum, for the remaining sum you will need additional outside capital.
Sources of equity capital can be assets and savings. Maybe your family and friends can also contribute to your dream of owning your own street food truck or give you a loan?
Of course, it is ideal if you can raise enough equity, but it is also important that your company remains liquid – borrowed capital from a bank, for example, can give you this security.
Financing options for your mobile kitchen if your equity capital is not sufficient
If your own resources are not sufficient to finance your food truck start-up – as is the case in most cases – you will need outside capital.
Credit
A loan from the house bank is the typical financing option for start-ups par excellence. Financing through a loan is possible if you can present securities and/or guarantees and a professional business plan. However, banks are less and less likely to provide loans, as many restaurant and café start-ups in the catering industry are proving to be flops. It is important that your concept has a long-term chance of survival in the market.
If you have a high level of equity capital, you have the chance to get a cheap loan. But don’t worry if the bank cannot be convinced! There are plenty of other potential money lenders.
State funding, start-up grant
You also have the possibility to apply for grants or other subsidies to start your food truck business. The job centre and the employment agency support start-ups in the food truck business with subsidies that do not have to be paid back later.
On the one hand, there is the start-up subsidy and the entry money. These are monthly grants that are awarded for up to 24 months. The investment subsidy consists of a one-off amount of up to 5.000 euros. That may not be much, but at least something. Here too, a well-prepared business plan will increase your chances of being approved.
Private investors
Private investors are also potential sources of liquidity. Private investors such as venture capital or business angels promote interesting business ideas and facilitate growth.
Private investors either invest equity in your company and become co-owners and therefore make a profit if your business is doing well, or they grant a loan without bearing any entrepreneurial risk.
In the first case, this would mean that you would not make your own decisions, but on the other hand, private investors facilitate your start as a food start-up not only with capital but also with expert knowledge and accompany you as a partner and mentor. Food Angels are, for example, business angels who have put their focus on tasteful investments.
Alternative financing options for your food trailer
Away from bank loans, subsidies and private investors, alternative financing options are gaining more and more interest from founders. These are also perfectly suited as an addition to existing classical financing.
Leasing
Leasing is an alternative to buying. You don’t have to pay the purchase price of your street food vending car immediately, but pay a monthly instalment over a fixed period. After the period has expired, you can buy the sales trailer at its residual value or return it to the leasing partner.
A clear advantage of leasing is that the instalments are manageable and your liquidity is protected. The disadvantage of leasing is that the leasing instalments are usually higher than when buying a mobile kitchen with outside financing.
Hire purchase
Unlike leasing, with hire purchase you pay not only for the use of the sales vehicle. After you have paid the last instalment, the street food car is yours. A final payment is not due. Another advantage of a hire purchase is that you can determine the term and the instalment. The disadvantage of a hire purchase is, like leasing, that you pay considerably more than if you would buy the food truck immediately.
Crowdfunding
Crowdfunding is not only frequently used for charitable projects, but is also a popular financing option for business start-ups. You can find numerous crowdfunding portals on the net, such as Kickstarter or Startnext. However, this financing option is not always successful and involves a lot of effort.
In order to find supporters, it is important that you make it clear exactly what added value the donor derives from the project. As a thank-you for the help you can offer vouchers for free street food creations.
Start-up competitions
Start-up competitions are a great way to attract investors for your street food idea and to promote your food trailer. At regional or national competitions you have the opportunity to present your innovative food truck idea and get in contact with potential investors and future customers.
Participating in a start-up competition also involves a lot of work and preparation. With a bit of luck, however, you can win lucrative prizes that will make it easier for you to enter the world of food trucks.
So which food trailer financing method is the best for me?
As you can see, as a prospective food truck owner you have a whole range of financing options. Which financing strategy is best suited to your project depends in particular on how much equity capital you bring with you. If you lack collateral, your business idea must be individual and promising in order to receive state subsidies or to convince investors.
If you have a high level of equity capital, it will be easier for you to obtain a loan. If you are willing to share your food trailer with an investor, you can get a co-owner on board – or in your food trailer – and receive professional support in implementing your business idea.
You can also cover your borrowing needs with different types of financing (e.g. loans and crowdfunding). If you are unsure, an experienced advisor can help you find the right business financing.
