Food truck financing

So you want to buy a food truck? Getting started isn’t cheap, but the good news is that there are a number of ways to get food truck financing in Canada. Keep reading to learn more about how food truck financing works, and compare food truck loans and lenders to find the best option for your unique set of needs and budget.

How to get financing for a food truck

There are at least eight different food truck financing options you can explore if you want to finance a food cart in Canada. From commercial vehicle loans to small business loans, we’ll take you through each one so you can find the perfect fit for your situation.

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1. Commercial vehicle loans

• How it works: Similar to equipment loans, a vehicle loan is based on the value of your food truck, which your lender uses as collateral. However, you likely won’t be able to buy your first food truck with a vehicle loan. New food trucks can cost up to $200,000, and lenders typically like to see that you’ve had some experience in the industry before offering that much money.
• What can I use it for? You may be able to use a vehicle loan to purchase a second or third food truck if you can prove to your lender that your business is making a reasonable profit.
• How much can I borrow? You’ll usually be able to borrow the full amount or close to it with vehicle loans. It depends on your lender and how successful your food truck is.
• How to apply: You’ll need to find the food truck you want to buy and then apply for financing from a bank, online lender or a dealership.
• Pros: There are lots of options available and repayment schedules are manageable.
• Cons: Many lenders require a down payment, some lenders may not offer enough financing for your needs and you risk losing your food truck if you can’t make repayments.

2. Small business loans

• How it works: This type of food truck financing allows you to borrow a lump sum of money and pay it back in fixed installments, usually over a period of 5 to 20 years.
• What can I use it for? You can take out small business loans to pay for most expenses, including employee salaries, vehicle repairs or equipment purchases.
• How much can I borrow? You may be able to borrow anywhere from $5,000 to $500,000, depending on factors such as your credit score and income. Amounts of up to $1 million are available from major banks.
• How to apply: Find a bank, credit union or online lender that offers small business loans. Depending on the lender, you may be able to apply online or you might need to visit a branch.
• Pros: Plenty of options are available and loans can be secured or unsecured.
• Cons: Rates are high for bad credit borrowers.

Compare lenders that offer food truck financing in Canada

1 - 3 of 3

Product CAFBL	APR Range	Loan Amount	Loan Term	Minimum Revenue	Minimum Time in Business	Loans Offered	Broker Compliance
Journey Capital Business Loan	8% – 29%	$5,000 - $300,000	4 - 24 months	$100,000/year	6+ months	Term Loan, Line of Credit, Merchant Cash Advance		To be eligible, you must have been in business for at least 6 months with a minimum annual gross revenue of $100,000. Journey Capital offers fast and simple financing. Apply in less than 10 minutes with your basic business information and see your loan offers without hurting your credit score. Get approved within 1 business day, and choose your term, amount and payback schedule once approved.	Go to siteMore Info Compare	loading Fetching your data...
Merchant Growth Business Loan	12.99% – 39.99%	$5,000 – $800,000	6 – 24 months	$10,000 /month	6 months	Unsecured Term, Line of Credit, Merchant Cash Advance		To be eligible, you must have been in business for at least 6 months and have a minimum of $10,000 in monthly sales. Merchant Growth offers financing tailored to business needs. It specializes in providing capital based on future cash flows, but it also offers fixed solutions. Fill out an application within 5 minutes and get your funds within 24 hours.	Go to siteMore Info Compare	loading Fetching your data...
Loans Canada Business Loan	6.99% - 46.96%	$500 - $500,000	3 - 60 months	over $10,000/month	9 months	Unsecured Term	Loans Canada is a loan search platform with access to multiple lenders. Applicants will be matched with a suitable lender based on credit history and borrowing requirements.	To be eligible, you must have been in business for at least 100 days, have a Canadian business bank account and show a minimum of $10,000 in monthly deposits ($120,000/year). Loans Canada connects Canadian small business owners to lenders offering financing up to $500,000. Complete one simple online application and get matched with your loan options.	Go to siteMore Info Compare	loading Fetching your data...

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3. Equipment loans

• How it works: This type of financing lets you borrow money specifically to pay for equipment. The loans is often secured by the equipment once it’s purchased, which means your lender can repossess it if you default on the loan.
• What can I use it for? You can use the loan to purchase equipment for your food truck.
• How much can I borrow? Borrow up to 80% of your equipment’s value—sometimes more.
• How to apply: Find the piece of equipment you want to purchase, and approach your bank or alternative lender to fill out an application for an equipment loan. They will assess the value of the asset and give you a portion of the money you need to purchase it.
• Pros: Get fast and easy access to funds, and use your equipment while you pay it off.
• Cons: You may need a down payment and risk losing your equipment if you can’t make repayments.

4. Canada Small Business Financing Program (CSBFP) loans

• How it works: CSBFP loans let you borrow money that’s backed by the Canadian government. Loans are available to small businesses and start-ups with annual revenue of less than $10 million.
• What can I use it for? You’ll be able to use the money you borrow to purchase or improve business assets like your food truck and equipment.
• How much can I borrow? You may be eligible to borrow up to $1 million, but only $500,000 of that amount can be used to purchase or improve new or used equipment.
• How to apply: While CSBFP loans are backed by the government, you still apply for them through your bank or credit union. Speak to your provider for a CSBFP-specific application.
• Pros: Large loan amounts are available with competitive rates.
• Cons: You may experience slow turnaround times, and eligibility requirements can be strict.

5. Merchant cash advance

• How it works: Merchant cash advances let you pay back the money you borrow based on how busy your food truck is. Your lender will simply take a percentage of your future credit and debit card sales until your food truck loan is paid back, so the amount you pay will vary each month.
• What can I use it for? You can take out a merchant cash advance to pay for any expenses related to your food truck business.
• How much can I borrow? The amount you can borrow will depend on your sales history.
• How to apply: You’ll need to meet minimum time in business and monthly sales requirements. Depending on the lender, you may be able to apply online or you may need to visit a branch.
• Pros: Bad credit is OK, and borrowing limits tend to be high.
• Cons: You’ll need to have past sales history, and interest rates can be higher than traditional loans.

6. Business line of credit

• How it works: A business line of credit provides a revolving line of credit that you can access whenever you need funds. You only pay interest on the money you use, not the entire credit limit. Once you repay the money you borrow, it becomes available for you to use once again if needed.
• What can I use it for? You can take out a business line of credit to pay for any of your food cart financing needs, making this one of the most versatile options available.
• How much can I borrow? You may be able to borrow anywhere from $2,000 to $500,000, but some lenders offer amounts of up to $1 million.
• How to apply: You can apply for a business line of credit with banks, credit unions and online lenders. Find the best fit for your business and apply by filling out an online application or, if required, by visiting a branch or phoning.
• Pros: Enjoy flexible access to funds. You only pay interest on what you use.
• Cons: Risk spending more than you need to spend. Business lines of credit generally have higher rates than business loans.

7. Personal loans

• How it works: You can borrow a lump sum of money to purchase and set up your food track, then pay back the principal and interest in monthly installments.
• What can I use it for? You can use a personal loan for any legitimate purpose, including starting a business.
• How much can I borrow? Loans of up to $50,000 are available.
• How to apply: You can apply online by providing your contact details and income and employment information. You’ll also typically need to undergo a credit check.
• Pros: Business lines of credit often have more lenient eligibility criteria than business loans, and there’s no collateral required.
• Cons: Funding may not be enough to cover your costs and generally have higher rates than business loans.

8. Microloans

• How it works: You may be able to access a small amount of funding with a microloan if your food truck is new or you’re just getting it off the ground. Microfinance programs offer loans to small business owners who struggle to qualify for loans from traditional lenders.
• What can I use it for? You can use a microloan for smaller expenses, such as topping up your inventory or buying a new piece of equipment.
• How much can I borrow? Microloans can start as low as $1,000 and are typically repaid over three months or more. They usually come with low interest rates compared to other types of food truck financing and generally max out at around $20,000 to $25,000.
• How to apply: These food truck loans are typically available with credit unions or non-profit organizations. Two examples of these organizations are the Access Community Capital Fund and the Community Futures Network of Canada.
• Pros: Microloans are designed for people who can’t access traditional credit, and eligibility criteria is usually lenient.
• Cons: The loan amount may not be enough.

Food truck financing with bad credit

You can also look into these alternative forms of food truck financing, especially if you can’t qualify for traditional financing due to bad credit.

Crowdfunding

• How it works: Crowdfunding is the process of raising money from a large number of people to fund your food truck. This could be an approach worth considering if you have a lot of friends or customers willing to invest in your business.
• What can I use it for? You can use crowdfunding money any way you please, whether it be buying a food truck, replacing an oven or hiring a new staff member.
• How much can I borrow? There’s no set limit on the amount of funds you can raise through crowdfunding, though the platform you use may impose a maximum limit. It will also impose fees or take a percentage of the money you raise to pay for its services.
• How to apply: You’ll need to set up a profile with a crowdfunding platform, set a fundraising goal and link your bank account. You can then share your appeal with your friends, family and customers to raise the money you need.
• Pros: You may not have to borrow money, and bad credit is OK.
• Cons: You might not raise enough funds, and platform fees apply.

Leasing

• How it works: With leasing, your lender buys the equipment and leases it back to you for a set amount of time. You’ll pay a monthly payment and may be able to purchase the equipment for a reduced price at the end of your contract. You’ll usually sign a lease for 3-10 years, and you won’t own the vehicle or equipment when your lease is up.
• What can I use it for? You can usually lease your food truck or the equipment you need to run your business. You then return the assets at the end of a specific term.
• How much can I borrow? You don’t borrow money with leasing as it’s not a form of food truck financing. Instead, you’ll pay a monthly fee to own/operate a third-party food truck or any supplementary equipment, and you’ll pay less upfront to start your business.
• How to apply: You’ll need to fill out an application with a lender that offers equipment leasing. You may also be able to apply for leasing directly from an equipment supplier.
• Pros: Leasing often comes with low monthly payments, and you can upgrade to a new food truck at the end of the lease.
• Cons: You don’t own the food truck, and the lease may restrict how you can use the vehicle.

Renting

• How it works: Renting a food truck is very similar to leasing one, except that it’s typically done for more short-term jobs. For example, you might rent a food truck to work a certain event, but that food truck won’t stay in your possession and you won’t be locked into a long-term lease.
• What can I use it for? Renting applies to vehicles and equipment and can be used to reduce the upfront costs of maintaining a full-time food truck.
• How much can I borrow? You don’t borrow money with renting, but you pay a monthly fee to own/operate a third-party food truck or any supplementary equipment you need.
• How to apply: You can apply to rent a food truck with a dedicated food truck rental company. These exist in a handful of large cities, such as Toronto, Montreal and Vancouver.
• Pros: You don’t have to borrow money and can lower your upfront costs.
• Cons: You don’t own the food truck. Plus, renting is only a short-term solution.

Where can I get food truck financing?

You can get food truck financing from a number of different lenders:

• Banks. Bank financing is provided by Canada’s Big Five Banks and other major financial institutions. This type of food truck financing can offer competitive rates and high loan amounts, but you’ll generally need to meet strict eligibility criteria to qualify.
• Credit union. Credit unions offer food truck financing that’s slightly more flexible than Big Bank loans. You’ll need to be a member of the credit union you want to borrow from.
• Online loans. Online loans are offered by online and alternative lenders. They usually come with fewer eligibility requirements than bank financing, and you may even be able to qualify with less-than-stellar credit. However, high rates apply for bad credit. Learn about the best private business loans.
• Dealerships and manufacturers. You can also apply for financing at the point of sale when you buy from a dealership or manufacturer. This is a convenient option, but you’ll need to compare the finance offer with loans from other lenders to make sure you’re getting a good deal.

Which food truck financing option is best for my business?

You might want to use these types of financing to cover the following expenses:

What do I need to apply?

The lender may ask for the following information and paperwork when you apply for food truck financing in Canada:

• A business plan. This is where you get to make a case for your business and convince the lender you’ve thoroughly thought through all the factors that will help you create a successful business.
• Financial projections. An important part of a detailed business plan, financial projections show the forecast growth of your business and that you will likely be able to pay off your debt on time.
• Personal financial statement. Many lenders require business owners to back their loan with a personal guarantee, which means that you’re responsible for repaying the loan if your business fails. A financial statement proves your ability to repay.
• Licences and permits. Every city has its own rules when it comes to licensing and permits. Before funding your business, your lender will likely want to see that you’re following regulations.

How to get financing for a food truck

The application process may vary depending on the type of financing you choose. However, you will generally need to complete the following steps to get food truck financing in Canada:

1. Choose the type of financing. Compare the food truck financing options above to decide which one is the best fit for you.
2. Compare lenders. Research lenders to find out about their eligibility requirements, loan amounts and terms. Some lenders will also allow you to apply for pre-approval, which gives you an idea of the rate that you’ll be eligible for without having to submit a full application.
3. Gather your paperwork. Put together all the documents the lender needs to process your application, including a business plan, financial projections, marketing plan and personal financial information.
4. Submit an application. Fill out the loan application form and submit your supporting documents.
5. Review and sign the loan contract. Check the loan contract carefully to make sure all details are correct before signing.

Bottom line

There are many different types of food truck financing options to choose from, each with its own pros and cons. Compare the types of food truck loans available, and learn when you might want to tap into each one to cover specific business expenses.

Frequently asked questions

• Can you get food truck financing with bad credit?

  It will be difficult to qualify for food truck financing from traditional lenders if you have bad credit. Some online lenders are willing to work with bad credit borrowers, but you'll need to present a strong business case and settle for a high interest rate on your loan. Other options worth considering include crowdfunding, lease agreements and renting a food truck.

• Can I get a startup loan for a food truck?

  It could prove difficult to get a startup loan for your food truck if you don't have experience in the industry. That said, you might get lucky, so it never hurts to apply. Find out more about startup loans if this is a route you want to explore.

• What kind of license do you need for a food truck?

  It varies by province and city, but you'll typically need the following types of licences:

  • Business licence
  • Vehicle licence
  • Vending permit
  • Public health inspection
  • Food Handler Certification

  Reach out to your local restaurant association for more details.

• How much does it cost to start a food truck in Canada?

  Costs vary widely depending on the type and size of food truck you purchase, whether you buy new or used and how much kitchen equipment you need to invest in to get your business up and running. As a very rough guide, a new food truck could cost anywhere from $30,000 to $200,000. Used vehicles are cheaper, but you'll need to take into account any upgrade and repair costs that might be required.

• What sort of insurance do I need to run a food truck?

  Food truck insurance can provide coverage against a wide range of risks. It will include general liability coverage and product liability coverage to protect you against claims of injury or property damage to a third party. It'll also include equipment breakdown coverage and commercial property insurance to cover against fire, theft and weather damage.

  Then you'll also need to consider the insurance coverage required to operate your vehicle on the road in case of a collision or any other incident. There are a lot of factors to consider, so it's worth speaking to an insurance broker to find coverage tailored to your needs.

To make sure you get accurate and helpful information, this guide has been edited by Leanne Escobal as part of our fact-checking process.

Written by

Tim Falk

Writer

Tim Falk is a freelance writer for Finder. Over the course of his 15-year writing career, he has reported on a wide range of personal finance topics. Whether you're investing in stocks and ETFs, comparing savings accounts or choosing a credit card, Tim wants to make it easier for you to understand. When he’s not staring at his computer, you can usually find him exploring the great outdoors. See full bio