SBA Loan for a Food Truck - Ultimate Guide

August 23, 2023

Adam Hoeksema

There are over 36,000 food trucks in the US, and growing every day. Many of these food trucks got their start with an SBA loan.  I know this because I spent over 12 years as the Executive Director of an SBA lender in the Midwest and we made many, many food truck loans.  I have also owned ProjectionHub for over a decade where we help business owners create financial projections for food truck businesses among many other businesses as well.  I wanted to take these two experiences and write a guide that I hope will help you through the SBA loan process for your food truck business. 

I plan to cover the following:

With that as our guide, let’s dive into the details!

Top SBA Lenders for Food Truck Businesses

In the Food Truck Businesses sector, The Huntington National Bank is the leading SBA lender. They have approved 86 SBA loans, with an average loan amount of $67,871. Below is a list of the top 10 SBA lenders for Food Truck Businesses based on data from 2018 to 2023.

Lender # of Loans Approved Average Loan Amount
The Huntington National Bank 86 $67,871
U.S. Bank, National Association 74 $53,591
Wells Fargo Bank, National Association 60 $15,130
TD Bank, National Association 35 $28,371
KeyBank National Association 24 $36,496
Manufacturers and Traders Trust Company 24 $61,654
Newtek Small Business Finance, Inc. 23 $113,883
Central Pacific Bank 13 $31,154
Readycap Lending, LLC 9 $81,922
JPMorgan Chase Bank, National Association 8 $127,263

Top SBA Lenders to Finance a Food Truck Acquisition

For those looking to acquire a food truck using an SBA loan, These are the lenders offering financing solutions. HomeTrust Bank leads the way with 2 approved loans and an average loan amount of $1,627,050. Below, you'll find the top 10 SBA lenders for financing food truck acquisitions.

Lender # of Loans Approved Average Loan Amount
HomeTrust Bank 2 $1,627,050
High Plains Bank 1 $86,200
Pacific Premier Bank 1 $530,000
Lincoln Savings Bank 1 $85,000
TD Bank, National Association 1 $75,000
First National Bank & Trust Co 1 $160,000
Manhattan Bank 1 $38,300
CIBC Bank USA 1 $379,700
Manufacturers and Traders Trust Company 1 $190,800
First Chatham Bank 1 $145,000

Top SBA Lenders for a Food Truck StartUp

For aspiring food truck entrepreneurs, The Huntington National Bank has been a leading SBA lender. They've approved 27 loans for food truck startups, with an average loan amount of $122,078. Below, you'll find the top 10 SBA lenders for financing food truck startups.

Lender # of Loans Approved Average Loan Amount
The Huntington National Bank 27 $122,078
Newtek Small Business Finance, Inc. 10 $41,550
TD Bank, National Association 6 $28,700
KeyBank National Association 6 $47,450
Arvest Bank 5 $47,140
CDC Small Business Finance Corporation 5 $83,920
LiftFund, Inc. 4 $71,000
Manufacturers and Traders Trust Company 4 $41,175
DreamSpring 3 $83,100
United Midwest Savings Bank, National Association 3 $70,000

Resource: Find an SBA Lender that is the perfect fit for your situation

What is an SBA Loan?

An SBA loan, when referring to the U.S. Small Business Administration, is a type of loan designed to support and promote the growth of small businesses. The SBA doesn't lend money directly to business owners. Instead, it sets guidelines for loans made by its partnering lenders, community development organizations, and micro-lending institutions. The SBA guarantees a portion of these loans, reducing the risk for lenders and making it easier for businesses, like food trucks, to secure financing.

Can I Get an SBA Loan for a Food Truck?

Yes, you can get an SBA loan for a food truck. The U.S. Small Business Administration (SBA) offers various loan programs that can be used to finance a wide range of small business types, including food trucks. However, securing an SBA loan requires meeting specific criteria and navigating the application process. Here's what you need to know:

SBA Loan Eligibility for a Food Truck:

To qualify for an SBA loan for your food truck, you generally need to:

  • Operate for Profit: Your food truck must be a for-profit venture.
  • Do Business in the U.S.: Your business operations must be based in the U.S. or its territories.
  • Have Invested Equity: Owners must have invested their own time or money into the business.
  • Exhausted Other Financial Resources: Before applying for an SBA loan, you typically need to have sought financing from other sources without success.
  • Meet SBA's Size Standards: Your food truck business must be considered "small" based on SBA's size standards, which vary by industry.

Types of SBA Loans for Food Trucks:

While the SBA offers several loan programs, the following are most relevant for food truck businesses:

  • 7(a) Loan Program: This is the most common SBA loan program. It provides financial help for businesses with special requirements, like starting or expanding a business, which includes food trucks.
  • Microloan Program: This program offers smaller loan amounts (up to $50,000) and can be used for various purposes, including buying a new food truck, equipment, or for working capital.
  • CDC/504 Loan Program: While more suited for larger projects like real estate or major equipment purchases, it might be applicable if you're considering a substantial investment in your food truck venture, like setting up a commissary or associated restaurant.

Why an SBA Loan is a Good Option for a Food Truck Business

In the context of a food truck business, an SBA loan can be particularly advantageous for several reasons:

  1. Start-up Costs: Launching a food truck requires a significant upfront investment. This includes the cost of the truck, modifications and equipment, inventory, permits, and more. An SBA loan can provide the necessary capital to cover these start-up costs.
  2. Expansion: For food truck operators looking to expand their fleet, open a brick-and-mortar location, or diversify their business in other ways, an SBA loan can offer the financing needed for such growth.
  3. Favorable Terms: SBA loans often come with competitive interest rates and longer repayment terms than traditional business loans. This makes them an attractive option for food truck entrepreneurs.
  4. Working Capital: Beyond the initial start-up costs, food truck businesses may need capital for day-to-day operations, especially during the early stages when the business is not yet profitable. An SBA loan can provide this working capital, ensuring smooth operations.
  5. Equipment and Renovation: As the food truck business grows, there might be a need for new equipment, truck renovations, or even the acquisition of additional trucks. An SBA loan can fund these requirements.

Next we need to consider buying an existing food truck business vs. starting your own food truck.  

Buying a Food Truck Business vs. Starting a New Food Truck

Buying an existing food truck business and starting a new one from scratch each come with their unique set of advantages and challenges. Here's a breakdown of the pros and cons for each option:

Buying an Existing Food Truck Business:

Pros:

  • Established Brand Recognition: The business may already have a recognizable brand, loyal customers, and a solid reputation, saving you time and effort on initial marketing and brand-building.
  • Existing Revenue Stream: An established business is likely to have consistent revenues and possibly even profits from day one.
  • Operational Systems in Place: Procedures for sourcing, inventory management, and daily operations might already be set up, reducing the initial learning curve.
  • Existing Permits and Licenses: Acquiring necessary permits and licenses can be time-consuming and challenging. An existing business may already have these in place.
  • Vendor Relationships: Established relationships with suppliers can lead to better pricing and terms.
  • Less Initial Uncertainty: While no business is risk-free, buying an established business reduces some of the uncertainties of a startup.

Cons:

  • Higher Upfront Cost: Buying an existing business is often more expensive than starting from scratch.
  • Inherited Problems: There may be hidden issues or challenges, such as pending liabilities, that you inherit with the purchase.
  • Less Flexibility: Making drastic changes to an existing business model, menu, or brand can be challenging.
  • Due Diligence Required: It's crucial to thoroughly investigate the business's finances, reputation, and potential issues before buying.

Starting a New Food Truck from Scratch:

Pros:

  • Creative Freedom: You have the freedom to create your brand, design, and menu exactly as you envision it.
  • Cost Flexibility: You can control costs by making decisions on equipment, location, and branding based on your budget.
  • No Legacy Issues: Starting fresh means no inherited problems or past reputational issues to deal with.
  • Potential for Franchising: If your new concept is successful, you have the potential to franchise it without pre-existing constraints.

Cons:

  • Initial Challenges: There are challenges associated with start-ups, from licensing to securing a location and building a customer base.
  • Higher Risk: New businesses are inherently riskier due to uncertainties and lack of historical data.
  • Time-Consuming: Building a brand, establishing operational systems, and gaining traction can take time.
  • Financial Uncertainty: It might take longer to turn a profit when starting from scratch.

Ultimately, the decision between buying an existing food truck business or starting a new one will depend on an individual's financial situation, risk tolerance, business experience, and personal preferences.

SBA Loan Application Process for a Food Truck

Once you have decided whether to buy a food truck or start your own food truck business, the last step we want to cover is the process for securing an SBA loan.  

1. Research and Choose the Right SBA Loan Program:

The SBA offers several loan programs, but for a food truck, the most applicable are typically:

  • 7(a) Loan Program: For general small business needs.
  • Microloan Program: For smaller loan amounts, particularly useful for startups.

Resource: The Ultimate Guide to the SBA Microloan Program

2. Create a Detailed Business Plan:

Before approaching a lender, have a robust business plan that includes:

  • Business Concept: Details about your food truck, including the type of cuisine, target audience, and unique selling propositions.
  • Market Analysis: Insights into your target market, competitors, and industry trends.
  • Operational Plan: Where and when you'll operate, suppliers, staffing, and logistics.
  • Marketing and Sales Strategies: How you plan to attract and retain customers.
  • Financial Projections: Detailed projections for at least the next three years, including expected revenues, expenses, and profits.

Resource:  Free Food Truck Business Plan Template 

3. Compile Necessary Documents:

Gather essential documents such as:

  • Personal and business credit history.
  • Income tax returns (typically the last three years).
  • Financial statements, including balance sheets and profit & loss statements.
  • Loan application history.
  • Legal documents: Business licenses, registration, leases, or franchise agreements.

4. Determine Your Eligibility:

Ensure you meet the SBA's requirements. This typically means:

  • Operating for profit.
  • Being considered a "small" business per SBA's standards.
  • Having invested your own time or money into the business.
  • Having used (or tried to use) other financial resources, including personal assets, before seeking SBA's help.

5. Choose an SBA-approved Lender:

While the SBA provides guidelines and guarantees a portion of the loan, you'll be borrowing from a third-party lender. This can be a traditional bank, credit union, or other financial institution.

6. Complete and Submit Your Application:

Fill out the SBA loan application provided by your lender. Attach all required documentation, ensuring everything is accurate and complete.

7. Undergo the Review Process:

Once submitted, the lender will review your application. They may:

  • Evaluate your credit scores (both personal and business).
  • Assess your business plan's viability.
  • Check the collateral you can provide.
  • Determine your ability to repay the loan based on financial projections.

Resource - Food Truck Financial Projection Template

8. Negotiation and Loan Structuring:

If your application is favorably reviewed, the lender will provide terms and conditions for the loan. This includes the loan amount, interest rate, repayment terms, and any other specifics.

9. Approval and Loan Disbursement:

Upon agreeing to the terms, the loan is approved. The lender will provide a timeline for when you'll receive the funds. Once disbursed, you can use the funds according to the agreed-upon purpose, such as purchasing a food truck, equipment, inventory, or other business-related expenses.

10. Start Repayments:

You'll begin repaying the loan based on the schedule provided by the lender. It's crucial to make timely payments to maintain good standing and avoid penalties.

About the Author

Adam is the Co-founder of ProjectionHub which helps entrepreneurs create financial projections for potential investors, lenders and internal business planning. Since 2012, over 50,000 entrepreneurs from around the world have used ProjectionHub to help create financial projections.

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