Used Concession Trailer Financing & Leasing: A Comprehensive Guide

Purchasing a used concession trailer can be a great business opportunity for entrepreneurs in the food, beverage, or mobile retail industries. However, the upfront cost of a quality used concession trailer can still be significant, making financing and leasing attractive options. This guide will walk you through everything you need to know about securing financing or leasing for a used concession trailer, from available options to the steps required to get approved.

Why Consider Financing or Leasing a Used Concession Trailer?

Starting or expanding a concession business can be expensive, even when opting for a used trailer. Financing or leasing allows you to acquire the necessary equipment without depleting your cash reserves. Here are some reasons to consider financing or leasing:

• Lower Upfront Costs: Financing or leasing can significantly reduce the initial capital required, enabling you to get started more quickly.
• Preserve Cash Flow: Instead of paying a lump sum, you can manage your payments over time, preserving cash flow for other business needs like inventory, marketing, or staffing.
• Flexible Payment Options: Leasing options often offer flexibility in terms of payment schedules, allowing you to align payments with your business's revenue cycles.
• Access to Better Equipment: By financing, you may be able to afford a higher-quality or more equipped trailer than you could with cash.

Financing a Used Concession Trailer

When financing a used concession trailer, you take out a loan to purchase the trailer outright. You will then repay the loan in fixed monthly installments, typically over 3 to 7 years, depending on the lender and terms.

Key Benefits of Financing

• Ownership: With financing, you own the trailer outright once the loan is paid off.
• Equity: By owning the trailer, you build equity, and it becomes an asset that can be resold or traded in the future.
• Customizations: Since the trailer is yours, you are free to make any modifications or customizations needed to fit your business model.

Loan Options for Financing a Used Concession Trailer

1. Equipment Loans: Many banks and specialized lenders offer equipment loans specifically designed for business equipment, including used concession trailers. These loans often have favorable terms because the trailer serves as collateral.

2. SBA Loans: The Small Business Administration (SBA) offers various loan programs that can be used for purchasing equipment like a used concession trailer. SBA 7(a) and SBA 504 loans are popular options, providing longer repayment terms and lower interest rates.

3. Traditional Business Loans: Some businesses may opt for a traditional business loan to finance their used concession trailer. These loans are based on the creditworthiness of the business and its owners.

How to Qualify for Trailer Financing

• Credit Score: A strong credit score (typically 650 and above) will increase your chances of getting approved for financing and securing favorable interest rates.
• Business Financials: Lenders will want to see financial statements, including income statements and balance sheets, to assess your business’s financial health.
• Down Payment: Be prepared to make a down payment, typically ranging from 10-20% of the trailer’s cost. Having a down payment can reduce your monthly payments and improve your loan terms.
• Collateral: Since the trailer often serves as collateral, lenders are typically more willing to approve financing for used concession trailers.

Leasing a Used Concession Trailer

Leasing is another option to acquire a used concession trailer without owning it outright. Leasing allows you to rent the trailer for a fixed period, after which you can either return it, buy it at a residual value, or upgrade to a newer model.

Key Benefits of Leasing

• Lower Monthly Payments: Leasing typically comes with lower monthly payments than financing because you're not paying for the full cost of the trailer upfront.
• Flexible Terms: Many leasing companies offer flexible terms and lengths, making it easier to fit the payments into your business's budget.
• Upgrade Opportunities: At the end of the lease, you may have the option to upgrade to a newer or more modern trailer.
• Tax Deductions: Leasing payments may be fully tax-deductible as a business expense, which can reduce your taxable income.

Types of Leasing Options

1. Fair Market Value (FMV) Lease: This lease type allows you to return the trailer at the end of the lease term or purchase it at its fair market value. FMV leases tend to have lower monthly payments but require a decision at the end of the term.

2. $1 Buyout Lease: With this lease, you can purchase the trailer at the end of the lease for $1. While monthly payments are higher, you essentially finance the trailer through leasing, with the intent to own.

3. Operating Lease: This short-term lease is designed for businesses that only need the trailer for a specific period or season. Once the term is complete, you return the trailer without any purchase obligations.

How to Qualify for Leasing

• Creditworthiness: Leasing companies, like lenders, will check your credit history to determine your eligibility. A credit score of 600 or above is typically preferred.
• Business History: Leasing companies may require you to show how long you’ve been in business and whether your revenue can support the lease payments.
• Down Payment: Some leases may require a small down payment, but many leases offer little to no upfront costs.

Steps to Get Financing or Leasing for a Used Concession Trailer

1. Evaluate Your Business Needs: Determine whether financing or leasing is better suited for your business. If you want to own the trailer long-term, financing is likely the best option. If you prefer flexibility, leasing may be more appropriate.

2. Check Your Credit: Ensure your credit score is in good shape. If necessary, take steps to improve your score by paying down existing debt or correcting errors in your credit report.

3. Prepare Documentation: Gather the necessary financial documents, including tax returns, income statements, and a business plan, to submit to potential lenders or leasing companies.

4. Shop for Lenders and Lessors: Look for lenders or leasing companies that specialize in equipment or trailer financing. Compare interest rates, lease terms, and other conditions to find the best deal.

5. Submit an Application: Once you’ve selected a lender or leasing company, complete the application process, providing all requested documentation and answering any questions they may have.

6. Review the Offer: Carefully review the loan or lease agreement, paying attention to the interest rate, repayment terms, and any additional fees. Make sure you understand the total cost of financing or leasing the trailer.

7. Acquire the Trailer: Once approved, you’ll be able to use the funds or lease agreement to acquire the used concession trailer and begin operating your business.

Conclusion

Financing or leasing a used concession trailer is an excellent option for business owners looking to start or expand their mobile business. Whether you choose financing for long-term ownership or leasing for flexibility, both options provide the necessary capital to get your business rolling. By understanding your financial needs, preparing your documentation, and choosing the right lender or lessor, you can secure the best terms to help your business grow and thrive.