How to Finance a Food Trailer in New Zealand

A food trailer is a business asset, and financing some or all of the purchase can allow you to start trading sooner while keeping cash available for the other costs involved in launching a food business.

Rather than putting all your savings into the trailer itself, you may choose to keep money aside for stock, branding, insurance, food business registration, site fees, marketing and working capital.

Whether you should finance your trailer or pay cash will depend on your individual circumstances. Here's a practical look at the main food trailer finance options available in New Zealand.

How Much Does a Food Trailer Cost in New Zealand?

The cost of a food trailer varies considerably depending on its size, layout, equipment and level of customisation. When working out your budget, remember that the trailer purchase price is only part of your total startup cost.

You may also need to budget for:

• Branding and signwriting
• Cooking and refrigeration equipment
• Food business registration and verification
• Insurance
• EFTPOS or POS equipment
• Initial food and packaging stock
• Market and site fees
• Power, LPG or generator requirements
• Marketing and launch costs
• Working capital for your first few months

This is one reason some buyers choose to finance the trailer rather than use all their available cash. Having a cash buffer can give your new business some breathing room while you establish regular trading locations, events and customers.

Option 1: Asset Finance

Asset finance is a common way for New Zealand businesses to fund vehicles, trailers, machinery and commercial equipment. Instead of paying the full purchase price upfront, you borrow money to purchase the asset and repay it over an agreed period.

With secured asset finance, the asset is generally used as security for the loan. Secured finance will usually have a lower interest rate than comparable unsecured borrowing.

Financing Through MTF Finance

Food Trailer Co. has a referral relationship with MTF Finance, a New Zealand finance provider offering secured and unsecured business lending.

MTF currently advertises secured business loans from $2,000 to $500,000, subject to lending criteria and approval.

Its published interest rates for loans secured against an asset currently range from 10.30% to 22.30% per annum. Your actual rate will depend on your individual circumstances and the lender's assessment.

If you're starting your first food business and don't yet have an established trading history, it can help to have a clear understanding of your expected sales, operating costs and cash flow before applying.

Food Trailer Co. can also provide a detailed trailer quote or invoice for your finance application.

What Could Food Trailer Finance Cost?

Your repayment will depend on:

• How much you borrow
• Your interest rate
• The loan term
• Establishment and other fees

For example, financing $30,000 over three years will produce a very different repayment from financing the same amount over five years.

When comparing finance, don't focus only on the weekly repayment. A lower weekly payment over a longer term can result in more interest being paid overall.

Look at the interest rate, fees, loan term and total amount repayable before deciding.

Option 2: Bank Finance

Your existing bank may also offer business or asset finance.

This can be worth exploring if you already operate a business and have an established relationship with your bank. Depending on your circumstances, the bank may ask for financial statements, bank statements, forecasts, details of your existing debts and a quote for the trailer you're purchasing.

It's worth comparing your bank's offer with specialist asset finance rather than assuming one option will automatically be cheaper.

Option 3: Personal or Unsecured Finance

Unsecured finance is another potential option.

Unlike secured asset finance, a specific asset isn't generally provided as security. The trade-off is that unsecured borrowing will typically have a higher interest rate.

MTF currently publishes unsecured interest rates ranging from 13.75% to 23.75% per annum, depending on individual circumstances.

Unsecured finance may be suitable for some buyers, particularly for smaller funding requirements or additional equipment, but it's important to compare the total cost with secured finance.

Option 4: Using a Deposit + Finance

You don't necessarily have to choose between paying for the entire trailer in cash and financing 100% of it. You can contribute some of your own money and finance the balance.

For example, if your trailer costs $40,000 + GST, you might choose to contribute $10,000 and discuss financing the remaining amount with your lender.

Putting more money towards the purchase reduces the amount you need to borrow, which generally means lower repayments and less interest over the life of the loan.

There isn't one standard deposit requirement. The amount required will depend on the lender, finance product and your individual circumstances.

How Much Cash Should You Keep Aside?

This is something we encourage new operators to think carefully about. Buying the trailer isn't the end of your startup costs.

Once you start trading, you'll still have expenses such as food, packaging, wages, fuel, LPG or electricity, market fees, insurance, merchant fees, accounting, maintenance and marketing. For this reason, using every dollar of available cash to purchase your trailer isn't automatically the best option.

Before deciding how much to finance, work out how much cash you'll realistically need to get through your first few months of operation.

What Do Lenders Look At?

Every lender has different criteria, but there are several things they may consider when assessing an application.

Your credit history: Your previous borrowing and repayment history can influence your application and the interest rate you're offered.

Your income and existing commitments: The lender will want to understand whether you can comfortably manage the proposed repayments alongside your existing expenses and debts.

The asset: For secured finance, the lender will consider the trailer being purchased and its value.

Your business numbers: If you're starting a new business, understanding your projected sales and expenses can help demonstrate that you've thought carefully about whether the business can support the finance.

Before applying, it's worth knowing approximately how much your food trailer needs to sell each week to cover operating expenses and finance repayments.

How to Prepare Before Applying

A little preparation can make the finance process easier. Start by working out your total startup budget, not just the trailer price. Then get a detailed quote for the trailer, including any equipment and customisation you want included.

You should also have a basic understanding of:

• Expected average customer spend
• Customers per trading day
• Trading days per week
• Food costs
• Wages
• Site fees
• Power and fuel
• Insurance
• Finance repayments
• Other regular business expenses

Your projections don't have to be perfect. The important thing is understanding what your business needs to generate for the numbers to work.

GST and Tax Considerations

There can also be tax considerations when purchasing a food trailer for business use.

GST

If your business is GST-registered and the relevant requirements are met, you may be able to claim the GST component of the trailer purchase.

For example:

Trailer: $40,000 + GST
GST: $6,000
Total invoice: $46,000

The timing and amount of any GST claim will depend on your circumstances, so confirm this with your accountant.

Interest and Depreciation

Interest on money borrowed for business purposes may be tax-deductible, subject to New Zealand tax rules. A food trailer used as a business asset may also qualify for depreciation.

Investment Boost

New Zealand businesses may also be eligible for Investment Boost.

For qualifying new or new-to-New-Zealand depreciable business assets, businesses may be able to claim an immediate deduction equal to 20% of the asset's cost, with normal depreciation applying to the remaining tax value.

A new food trailer may qualify depending on your circumstances and how the asset is used.

Talk to your accountant before relying on GST recovery, depreciation or Investment Boost when deciding what you can afford.

Food Trailer Finance FAQs

Can I finance a food trailer if I'm starting my first business?

Potentially, yes. You don't necessarily need years of trading history to apply.

The lender will assess your overall financial circumstances, affordability and credit history. Having realistic revenue and expense projections can also help you prepare for the finance process.

How much deposit do I need?

There isn't one universal deposit requirement. The amount will depend on the lender, the asset and your financial circumstances. Contributing more yourself will reduce the amount you need to borrow and generally reduce your repayments and total interest.

Can equipment be included in the finance?

Potentially. If you're purchasing a Food Trailer Co. trailer with equipment already installed, ask your lender whether the complete purchase can be included in the finance application.

What interest rate should I expect?

There isn't one standard food trailer finance rate. Your rate will depend on the lender, security and your financial circumstances. MTF currently publishes rates of 10.30% to 22.30% p.a. for loans secured against an asset and 13.75% to 23.75% p.a. for unsecured loans.

Always check current rates and obtain a personalised quote before making a decision.

How quickly can finance be approved?

Approval times vary between lenders and applications. Having your identification, financial information and trailer quote ready can help avoid unnecessary delays.

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Finance is subject to lender approval, lending criteria, fees, terms and conditions. Interest rates and finance products can change. This article provides general information only and does not constitute financial, accounting or tax advice. Consider seeking independent professional advice before making a significant business investment.