If you've been dreaming of operating your own food truck business, there are a number of finance options. There are also a number of costs you need to consider, and licences to apply for before you can get started. And just as importantly, you'll have to get the right types of insurance.
Apply for up to $300,000 from Lumi and benefit from short loan terms, no early repayment fees and once approved receive your funds in just one business day.
Borrow up to $500,000 and receive the funds within 24 hours of approval. Loans under $200,000 do not require security. Use this loan for your business needs, like business expansion or purchasing equipment.
How can I start a food truck business in Australia?
As with any business, you'll need to start with a plan. Before applying for a loan and buying that food truck, you'll need to iron out a solid business plan and figure out who your customers are and the market you'll be catering to. Consider your competition and what sets you apart from them.
Then work on a budget. You'll have to take into account who will run your food truck, if you need to hire people, as well as your own business experience and qualifications. Also consider other costs like the truck itself, and inventory. You need to figure out the type of food you want to sell, whether there's a customer base for it, where and when you can sell it and the type of vehicle you can sell it from. Once you have a plan, you can work on funding and licences.
Finder survey: How many Australians from different states have considered franchising a business?
Response
WA
VIC
SA
QLD
NSW
No
83.76%
74.74%
86.08%
79.37%
72.75%
Yes
16.24%
25.26%
13.92%
20.63%
27.25%
Source: Finder survey by Pure Profile of 1145 Australians, December 2023 Data for ACT, NT, TAS not shown due to insufficient sample size. Some other states may also be excluded for this reason.
How can I finance a food truck business in Australia?
There are a number of loans you can apply for to finance your food truck business. Not all types of funding will suit your business. Comparing business loans can help you find a loan that suits your needs and matches your circumstances. Your options include:
Secured business loan. With this type of loan, you'll need to provide an asset as loan security. Secured loans generally come with high borrowing amounts and lower interest rates. How much you can borrow will depend on the value of the asset.
Unsecured business loan. This type of loan does not require an asset as collateral for the loan. As a result, borrowing amounts are lower, while interest rates are higher. You'll need a good credit score to be approved for an unsecured business loan.
Business line of credit. This is a revolving line of credit, which allows you to borrow money as and when you need it. The line of credit can be either secured or unsecured. You'll only have to repay the amount borrowed, with interest. Interest for this type of loan tends to be higher.
Equipment finance. With this type of loan, you can buy business equipment, vehicles and fixtures. There are a range of finance options, including commercial hire purchase, chattel mortgage, finance leasing and operating leasing. You may also be eligible for tax deductions.
Peer-to-peer business loan. This is a marketplace loan where an investor will finance your loan. The marketplace will be the peer-to-peer lending platform. These types of loans may be easier to qualify for than bank loans. They also offer risk-based lending. This is where your credit score will determine whether you get a high or low interest rate. Good credit can get you a competitive rate, while bad credit borrowers will receive a higher rate.
What should I look for when comparing business loans?
When you're comparing loans and lenders, there are a number of factors you'll need to take into account. These include:
Type of business loan. Not all loans are made equal. You need to find a loan that suits your business's unique circumstances and is able to provide the kind of financing you need. For instance, if you require ongoing credit, a line of credit will be more suitable than a secured or unsecured business loan. If you need financing only for business equipment, an equipment loan may be more suitable. If you need to buy the food truck and pay for equipment, staff and inventory, you may want to consider a secured, unsecured or peer-to-peer business loan. Depending on how you plan to use the funds and what you need them for, you can narrow down your options.
Requirements for loan security. Will you need to offer an asset to secure the loan? If you have security to offer, like residential or commercial property, then a secured loan will give you access to higher borrowing amounts. If you don't have security or don't want to offer it, then an unsecured loan will be your option.
Interest rate. How much you pay in interest will affect your monthly repayments and the total cost of the loan. Look for a loan that offers a low rate of interest. Comparing interest rates is a good way to check if the loan is competitive. You will have to choose between a fixed or variable rate of interest. With a fixed rate, you get the security of predictable repayments. With a variable rate, you can benefit from a lower rate if interest rates fall.
Fees and comparison rates. As important as interest rates are, you should keep an eye on fees and the comparison rate. This includes application fees and account-keeping fees. These will vary between lenders, so make sure you account for them. They will add to the cost of your loan. Some loans may offer low rates and high fees. This may work out to be more expensive, so keeping an eye out for fees is a good idea. The comparison rate takes into account interest and the fees you will be charged. It will give you an indication of the true cost of the loan.
Loan term. Your loan term is how long you have to repay the loan. The length of the term will affect how high your repayments are. That is, with a short term, you can expect higher monthly repayments, but with longer terms, you pay more in interest and fees. You can use a business loan calculator to get an idea of what your repayments will be like with different loan terms.
Loan amount. Lenders have set minimum and maximum lending amounts. Make sure the amount you need is on offer from the lender.
Loan features. Look for a loan that offers flexibility. Can you tailor the loan to suit the unique income and expense requirements of your business? If there are specific loan features you would like to have, make sure to check which loans offer these features. This can include early repayments, early exit without penalty and redraw facilities.
Turnaround time. Check how long the lender takes to approve the loan and transfer the funds to you. If you need your funds within a certain time, make sure the lender is able to accommodate this. Secured loans will generally take longer to process than unsecured loans.
Eligibility. This may seem obvious, but you should only apply to a lender if you meet all its criteria. This includes your finances and credit history.
What types of food trucks can I choose from?
There are a number of vehicles you can use for your mobile catering business. These include:
Trucks
Vans
Trailers
Carts or marquees
You can buy the truck either new or second hand. While your finances will play a role in the type of truck you choose, you also need to factor in insurance costs. Another thing to consider is the visual presentation of your food truck, as it is your primary business premise and will help customers recognise and choose to buy from your truck. So, you'll also need to factor in the cost of customising your truck and making it stand out.
What are the costs involved with a food truck business?
This will vary depending on the truck itself, and other business costs. Much of the cost is upfront, in acquiring the truck and equipping it. The cost of the truck will vary depending on whether it's new or used. A new truck could cost up to $100,000, while a used food truck may cost over $15,000. You could also buy a standard vehicle and convert it. You may also have equipment costs if you have to buy, for instance, a griddle, deep fryer or sandwich press. Apart from the cost of the vehicle and cooking equipment, you may also have to pay to customise your truck and make it unique.
You should also consider labour and inventory costs. Your staff may have to meet certain food industry requirements, including training in food handling and food safety. In some states, you may also have to have a nominated Food Safety Supervisor on site. This person will have to be trained and registered. Then there are wages for the staff, as well as other operating costs like the cost of inventory.
The licence to operate itself will cost a fee, and you may have to pay to renew your licence annually. There will also be insurance costs. An insurance broker with experience in the mobile food industry may be able to point you in the right direction.
What kind of licences will I have to apply for?
To operate a food truck, you'll have to apply for a number of licences. This will vary from state to state, so make sure you do your research. Licensing requirements may also vary depending on the type of food being served. For example, cooked meat, seafood and dairy products are considered potentially hazardous foods. These foods are made to order and need to be maintained at a certain temperature.
You'll need to register your business and apply for a licence from your local council. The truck itself may need to be registered, and you may need a valid driver's licence. If you wish to operate in other local government areas, you'll need to obtain the appropriate licences.
There may also be other regulations you'll have to comply with. These can include restrictions on where you can operate from and exclusion zones. There may also be limited hours of operation and restrictions regarding proximity to other businesses.
What types of insurance will I need to consider?
Apart from getting the right licence to operate, you'll also need insurance coverage. It's not the same as car insurance, as you'll need the same protection as other hospitality businesses. Insurance can cover you for fire, theft and liabilities that come with selling food (for example, someone getting sick). You may need more than one type of insurance, so it's best to speak to an experienced insurance broker. You may require insurance for:
Public liability
Vehicle
Damage and theft
Income
When it comes to public liability, make sure the cover is comprehensive. This is because a lawsuit could threaten the continuation of your business if you don't have appropriate cover.
What should I consider before starting a food truck business?
All this can sound daunting, but operating a food truck can still be the fun, independent venture you thought it would be. Here's what you should keep in mind before starting your food truck business:
Do your research. This includes vetting whether the food you want to serve is something the customer wants. Is the local market saturated with a certain type of food? Are you serving people the type of food they want? You should also account for practical considerations, such as limited kitchen space. Optimise your menu for the space you have and the ingredients you can source. Make it food truck friendly. You should also consider your competition and how you stand out from them.
Buy the right insurance. Insurance is important, and getting the right types of insurance can save you and your business down the line.
Make food safety a priority. You should ensure that you and your staff are trained and operate at the food safety and hygiene standards required. Severe penalties can apply for non-compliance. There will also be regular and ongoing inspections from your council's health department.
A food truck business can be rewarding and a vital part of your community. With the right amount of planning and research, you could get started in no time.
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Maurice Thach is a publisher at Finder who covers anything that sounds hard to compare. This includes life insurance policies, side hustle ideas and energy plans. Maurice has a Bachelor of Commerce from the University of New South Wales, a Tier 2 General Insurance certification and a Tier 1 Life Insurance certification. Outside of work, you'll probably find Maurice hitting up the nearest basketball court.
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