Are you one of the many food truck vendors financing or planning to finance your food truck startup with credit cards? Today we’ll examine credit card financing of a food truck business and discuss its downsides and alternatives for prospective vendors.

When using credit cards to finance your mobile food business, you have to be realistic. If you are prepared for problems, the better positioned you’ll be if they do arise.

Credit Card Financing Your Food Truck Business

If you have a fairly good FICO credit score, it can be easy to get $50,000 in credit. If you have a FICO of 700 or higher, you probably receive a lot of credit card offers in the mail, and simply by accepting them, you will end up with a lot of credit.

The downside of using credit cards to start your food truck business is that you’re typically required to be a personal guarantor and thus are personally liable for all of your business debts. This has the tendency of adding unwanted stress before you even get your food truck on the road.

If your food truck financing needs are fairly low, putting your startup expenses on a credit card is something to consider. By doing this, you avoid having to apply for a loan. You don’t need to bring in a partner.

One reason I’ve heard used for financing your food truck this way is that you get credit card perks that you can use for your food truck such as discounts on gasoline. You can also reverse charges if your truck or equipment are not delivered or their quality is not what was promised.

RELATED: 7 Common Reasons For Food Truck Loan Denials

3 smart ways to use credit card financing

There have been a lot of recent complaints about food truck builders accepting cash payments but not delivering completed trucks. If you run into this type f issue, you can contact the credit card company to get the charges removed.

There are, however, intelligent ways to use credit card financing for your food truck business. Here are three suggestions that will help you.

  • Separate records. Keep separate cards for food truck business and personal expenses. If you end up getting audited, you want to expose only the financial records required. If everything is on a single credit card, your expenses will be mixed up and may force you to disclose more than desired about your finances.
  • Balance transfers. Consider frequent interest-free balance transfers and playing the free interest for as long as you can. You will save yourself a lot of money doing this.
  • Keep some cash on hand. Keep some spare cash in a separate account. This allows you to make the payments to your credit cards, even if your food truck isn’t producing cash flow yet. If you get credit card checks, then deposit some money into your account and use this to service the debt while you are waiting for your truck to hit the streets.

The Bottom Line

For prospective food truckers struggling to find funding, borrowing against a credit card can be an attractive option. If you feel using a credit card financing for all or part of your food truck business is the best option for you, be sure to read the fine print before accepting your next credit card offer. Understanding the risks before you accept the offer can save you a lot of financial pain in the future.

Did you use credit card financing to start your food truck business? Did you run into any problems? We’d love to hear about them. Share your thoughts in the comment section, our food truck forum or social media. Facebook | Twitter