Ways To Finance A Food Truck
Ways To Finance A Food Truck In Australia
We don’t have to tell you that food truck can be a great way to start and scale a business – but like any business, it requires startup capital to get up and running. The major asset you need to get in business is that truck or van to start slinging burgers, filling tacos, or tossing paella – whatever your fancy or niche, you will need dough to make that bread in your new food truck.
You need a truck that’s food safe
If you intend to create a mobile food business – be it a truck, van, trailer, bicycle, boat, or even portable shipping container, it needs to be fitted or retrofitted to comply wit the Food Safety Practices regulations including requirements on Food Premises Equipment. This is vital, as you will not be allowed to trade without it. For all the requirements, click here to view.
Other aspects to consider
Before you start out, you’ll need to have proper accreditation to operate a food retail business, which may vary from state to state. You’ll also have to register your business with ASIC and gain an Australian Business Number. You’ll likely have to obtain a licence from your local shire or council to operate on council property (e.g. roadsides or carparks.)
You and any staff you hire will need a qualification in food handling and food safety either from a registered training organisation, instruction manuals, or in-house training by your nominated food safety supervisor. The food safety supervisor must be trained in food safety and handling at an accredited RTO and complete an appropriate course. You should also be aware of taking out insurance: public liability insurance, product liability insurance, workers compensation insurance, and vehicle protection insurance.
You may also want to register your food truck on a food delivery app such as Uber Eats or Menulog to generate extra income if you aren’t booked for an event or out and about. You can still accept orders if the general public has access to the venue you are situated and have the capacity to cater to extra customers.
Your savings
You could launch a food truck side hustle with your own cash, savings, or equity…but should you? Cash flow may trickle in at first, which may stretch your resources and force you to borrow money or use credit. Long term assets, such as trucks, should be funded with long-term liabilities, like loans. Putting all your (nest) eggs in one basket is a recipe for disaster if things don’t go 100% right.
Friends and family
Again, asking friends and family for money is fraught with danger. Adding money into any relationship can cause friction and angst – especially if there’s potential for their investments to disappear with nothing to show for it. Do you really want to lose friendships or strain family relationships to realise your dream? Also, do you want them giving their two cents when you want to go electric and they insist petrol is the way to go?
Personal loans
Personal loans are a good alternative to the above, although there are limitations to personal loans as opposed to chattel mortgages. Your bank or lender may ask for a deposit – which may be comparable to small apartment deposit for some trucks – and will ask for repayments every month regardless of whether you are operating or not. This is where chattel mortgages are a better choice.
Chattel mortgage or hire purchase
Financing your food truck with a chattel mortgage is likely the best method out of the previous three. A chattel mortgage is a commercial loan for assets being used for business purposes over 50% of the time. Chattel mortgages can be flexible in terms of repayments (e.g. seasonal food trucks during footy season) and borrowing power – a business can borrow more than the value of the truck to cover retrofitting and other expenses. A business can also claim the GST paid, interest paid, depreciation, and fuel/maintenance costs as tax deductions. A hire purchase is similar, except ownership stays with the bank/lender, which may be beneficial for certain business’ accounting methods.
Crowdfunding and others
Other ideas to raise money for your food truck is going to crowdfunding platforms like Indiegogo or Pozible. However, you will need to market your idea – which is difficult as you may only appeal to a small area, at least initially. Also, if you don’t meet your funding target, you don’t get the money (in some cases.)
Whatever method you choose, you need to figure out if it’s fair, flexible, and equitable in terms getting value for your transaction. If you’re ever unsure, ask a business adviser or the community for help!
