Some of our clients have asked us, “Where can you get a cannabis business loan?” Or, “Where can you get a business loan for a dispensary?”
While it’s not always a loan for a dispensary, it’s pretty challenging for many cannabis business operators to find the funding they need.
Cannabis business funding, in general, is a touchy subject. Even as new states continue legalizing and decriminalizing cannabis for medical and adult-use, the financial sector is hesitant to work with these operations.
However, it’s important to note; there’s a lot of opportunity in the cannabis sector. Entrepreneurs and ganjapreneurs are ecstatic to get involved, and with proper financial backing, many achieve the success they’re chasing.
Traditional lenders aren’t going to help you get a loan for a cannabis dispensary. But we have several options for cannabis business loans worth looking into.
Keep reading to learn more about the options for funding a cannabis business.
Looking for a way to fund your cannabis business? Contact us today to learn more about how we can help you get a marijuana business loan.
How hard is it to qualify for a business loan?
Before applying for a cannabis business loan, it’s ideal to know what to expect. Simply put, sometimes, it’s pretty challenging to obtain cannabis business funding or loans.
Most of the traditional options for financing a small business aren’t available to cannabis business operators. This is primarily due to federal regulation, which makes funding a challenge for borrowers and lenders.
How can you qualify for a cannabis business loan?
For starters, one of the most typical questions we get asked is, “Can I qualify for a cannabis business loan if I have bad credit?” The answer surprises most people.
Cannabis businesses can get approved for funding with invoice financing. Business Cash Advance is also an option for those with poor credit. However, other options exist.
Asset-Based Financing, while more difficult to get with poor credit, could be an option. But you’ll have to speak with the lender directly to determine whether this will work for you.
Invoice financing is usually one of the best options because it doesn’t account for business credit. If your business invoices customers regularly, this could work for you.
Business Cash Advance is also appealing because it accepts bad credit. However, your terms will depend on your personal credit. With this in mind, it’s crucial to determine which option will work best for you per your credit.
Some people wonder, “Can I get cannabis business loans if I’m a startup? This is doubtful. Your business should have a record of sales or receivables and, if it’s a startup, it likely has neither.
Even with prior company ownership experience, funding for marijuana or cannabis business isn’t accessible without data from its operations. Thus, if you’re running a cannabis startup, it’s ideal to find alternative options and funding solutions to acquire the capital you seek.
Can cannabis businesses borrow through a bank or other commercial lender?
The option to go with a commercial lender to finance your cannabis business is available. But since this option is quite new to the industry, it could be challenging to find one.
With our experience handling the financial aspects of cannabis operations, we know where to find commercial cannabis lenders. Our connections in this industry have made us a resource to marijuana business operators looking for funding to fuel their growth.
Have a cannabis business that needs capital? Contact us today to learn more about how we can obtain a marijuana business loan.
Cannabis Business & Dispensary Loan Types
Private Loans for Cannabis Businesses
Private loans for marijuana companies come from non-bank lenders. The rates commonly range from 8 to 25 percent, with lending terms spanning from one to three years. The funds are usually available within seven to fourteen days. These lenders offer business funding to growers and manufacturers of cannabis products as opposed to dispensaries. However, if the dispensary has proven revenue, this could be an option. Venture capital firms are the go-to for private loans.
Real Estate Loans for Marijuana Companies
For cannabis CEOs interested in buying land to cultivate cannabis or real estate to operate the business, a real estate loan could be a solid option. Hard money loans, bridge loans, and shorter-term mortgages are generally available for cannabis businesses and medical marijuana dispensaries. The interest rates usually range from 8 to 20 percent, with terms ranging from 1 to five years. Funding takes between 30 and 60 days following the application.
Common Cannabis Business Loan Questions
What type of information is needed to apply for a cannabis business loan?
Even though cannabis lenders are operating in a non-traditional sector, they still operate the same way as other lenders. This means you’ll need to have your finances in order when the time comes to apply for your loan.
Lenders will want to look over your financial records, which should include income statements, balance sheets, and bank statements. They’ll also want to analyze your credit risk profile and capital needs. In some cases, you might find lenders catering to the cannabis industry interested in looking over your key management staff and active cannabis licenses you’re holding.
Are monthly inventory and/or cash audits necessary?
While this is something we recommend all of our clients have done, traditional financial institutions will demand monthly inventory and cash audits throughout your loan’s life. This is especially true for the institutions that administer loans for the Small Business Association (SBA). While cannabis-specific lenders might not demand these monthly audits with timely payments, it’s still best practice to keep up with your monthly inventory and cash audits.
How much money can I borrow for my cannabis company?
Just as with other loans, the credit limit for cannabis businesses depends on a few variables. These include your capital needs, credit risk profile, balance sheets, income statements, bank statements, management personnel, credit score, and others. The size of a cannabis loan is contingent on what kind of loan you pursue, as well as the reason you need cannabis business financing. Loans generally range from a couple of thousand dollars to several million.
How do I determine what type of loan is best for my cannabis business?
Several factors will come into play here. Consider how your business operates in the industry, how much capital you need, your business model, how often you’ll need to access funds, your credit risk profile, and your expected loan term. With any type of loan, it’s best to speak with a lender that will assure compliance as the industry continues expanding and changing.
How to Get a Loan for a Cannabis Business
The first step to getting a cannabis business loan is to ensure you have your financials in order. Documentation is the key to getting the funding your company needs.
Interested in getting your cannabis business on track to get a sizable loan? Contact us today for expert assistance.