Federal Cannabis Bill Backed by Michigan Banking Groups

Federal Cannabis Bill Backed by Michigan Banking Groups

With federal legislation making its way through Congress this session, we’re expecting more banks offering services to cannabusinesses throughout the U.S. – particularly in Michigan.

In April, we saw the Secure and Fair Enforcement (SAFE) Banking Act pass the U.S. House on a bipartisan 321-101 vote. Currently, we see the Senate divided on the bill as Democrats ponder whether they will push the bill on, shoot for federal cannabis legalization, or combine the issue with widespread criminal justice reform.

Looking to grow your cannabis business in Michigan? We help our clients scale their businesses while maintaining compliance! Contact us today to learn what we can do for your operation.

Supporting the SAFE Banking Act: A Far Cry from Supporting a Budding Cannabis Industry

The Bankers & Credit Union in Michigan: Thoughts on The SAFE Banking Act

At this point, the SAFE Banking Act has plenty of support. Mike Tierney, the president and CEO of the Community Bankers of Michigan, claims he’s “very optimistic” that the bill will pass to the Senate. For this to happen, it will need 60 votes to avoid a filibuster.

But there’s still reason for concern. Democrats might go after full legalization even with widespread support for the SAFE Banking Act throughout the banking industry and financial institutions. Since the industry has expanded to nearly $1 billion in Michigan alone, these professionals understand that it’s time to get involved.

“Chances are good, except if they decide they want to go for the more aggressive legislation,” Tierney told MiBiz. “We’d all like to just see the SAFE Banking Act. It would be fine if we could provide services to the cannabis industry without any federal repercussions. We don’t need to have marijuana legalized on the federal level.”

The SAFE Banking Act was recently reintroduced in March after it didn’t get enough support to pass in the last congressional term. This bill stands to keep federal agencies from targeting financial institutions serving cannabis-related operations in states where these businesses are legal.

At this point, marijuana is still illegal federally, even though 38 states have legalized it in one way or another. This includes Michigan, where cannabis is legal for medical and adult use. The problem this bill aims to solve is that the banks and credit unions serving this industry have to comply with rigorous requirements, which keeps many from offering these operations traditional banking services.

“There are a lot of banks that don’t want to, regardless of whether it’s legal,” Tierney said. “That may change once it’s legal, but there are bankers that just don’t feel it’s an industry they want to serve right now. Some just don’t feel it’s a benefit to their community.”

However, despite this belief running rampant in some banking communities, the fact of the matter still stands: legal cannabusinesses are supporting communities. Between tax revenue states are generating, local jobs created, and community initiatives, most of these legitimate businesses contribute their fair share to the communities they serve.

An Update on Michigan's Legal Cannabis Sector from a Banking Perspective

An Update on Michigan’s Legal Cannabis Sector from a Banking Perspective

Last year, the Marijuana Regulatory Agency reported that Michigan’s medical and adult-use marijuana sector generated an impressive $984.7 million in sales. However, equally important to note is the $360 million in sales observed during the first quarter of 2021. In March alone, adult-use marijuana sales accounted for $97.5 million in revenue.

Tierney claims that around ten banks in Michigan offer services to the cannabis sector. The Michigan Credit Union League believes around ten credit unions are working with cannabusinesses, too.

“The appetite is definitely there because it’s what their communities are demanding and what their businesses are demanding. Even those that might not necessarily have a strong desire to get their feet wet in cannabis, that’s what they’re hearing from their communities and their businesses, and they’re going to roll up their sleeves and look into it,” said Michigan Credit Union League CEO Patty Corkery. “The bottom line is it is legal in our state, and we need to support the businesses that are engaged in legal activities.”

The SAFE Banking Act stands to support cannabis businesses, as well as the banking and credit industry. Cannabis operations will receive more access to the financial services it needs to expand, while the bankers and credit union will be free to participate without federal repercussion.

However, some believe this isn’t the right way to provide these services to the cannabis sector.

Supporting the SAFE Banking Act: A Far Cry from Supporting a Budding Cannabis Industry

Working with and supporting the cannabis industry is a far cry from supporting its expansion. Despite so many credit unions wanting to serve cannabis business with the SAFE Banking Act passing, the passage of this law would likely be a setback for those operating in the space and consumers alike.

Many fear that passing this modest bill could be problematic for the cannabis industry. Senator Chuck Schumer is actually working against this idea.

Senator Schumer’s Comprehensive Bill

Senator Schumer’s Comprehensive Bill

Senator Schumer and his colleagues have been working on a bill. They say they’re not going to “bargain” against themselves by accepting the modest SAFE Banking Act. While he believes banking reform is necessary, he thinks this will risk comprehensive reform.

The idea here is that Republicans and moderate Democrats haven’t yet decided about bolder policy change. Those on the fence are less likely to vote for it if they receive a modest bill like the SAFE Banking Act. So, while Michigan banking groups support this bill, it has the potential to push federal legalization back if passed.

While banks, credit unions, and cannabis operations have much to gain from the SAFE Banking Act, there’s more to be won here than accessible banking services. But it seems that some are more interested in instant gratification than a federally legal cannabis space.

The problem here is that it’s hard to make progress when the people who stand to gain from the SAFE Banking Act are willing to settle. If and when federal legalization goes into effect, cannabusinesses will be open to the entire U.S. cannabis market. This, of course, includes shipping product across state borders without needing to worry about federal prosecution.

The federal government needs to provide guidance if they want cannabis businesses in states where it is legal, like Michigan, to survive and thrive. The current banking system makes this impossible for these companies because of their inability to have access or maintain capital as an industry. But if the SAFE Banking Act passes, there’s a chance that it will take months – or even years – to get lawmakers to approve another bill.

Schumer’s bill targets more security for cannabis operations through accessible banking, as well as their assets and resources. But he’s taking it even further by pushing for more comprehensive cannabis banking legislation. He wants to “ensure restorative justice, public health, and implement responsible taxes and regulations,” which some have compared to the recent legalization bill passed in New York.

Serve The Great Lake State While You Prepare for Federal Legalization

Looking for assistance scaling your Michigan cannabis operation in preparation for federal legalization? We’ll organize your financials and maintain compliance every step of the way!

Contact us today for expert help!

New Jersey Cannabis Businesses Could Benefit from Blockchain & Crypto-Asset Banking Developments

New Jersey Cannabis Businesses Could Benefit from Blockchain & Crypto-Asset Banking Developments

Blockchain and crypto-asset payment systems are becoming increasingly common across various industries; people purchase cars, homes, services, and more with these payment systems’ availability. But the impact these systems can have on the cannabis sector makes them viable solutions for the current challenges in place.

Currently, we’ve had numerous states and territories legalize adult-use cannabis. One of the newest states to do so is New Jersey. NJ voters passed legalization with the November 2020 election ballot initiative. However, since cannabis is still listed as a Schedule 1 controlled substance under the Controlled Substances Act (CSA), federal and state laws are at odds with one another. In turn, cannabis companies in New Jersey will face a plethora of challenges, including banking and payment processing.

Every business across all industries needs a fully functioning payment infrastructure. Without this, it’s nearly impossible to scale a business efficiently and effectively. Even with the political acceptance and so much potential for the New Jersey cannabis marketplace to thrive, the business landscape is slow to evolve. But the developments we see in blockchain and crypto-asset banking developments could be the answer to several key challenges.

Wondering how to implement blockchain and crypto-asset systems in your cannabis business? Contact us today to learn more about how we can help.

NJ cannabis business challenges

NJ Cannabis Business Challenges

While Governor Murphy’s signature on the adult-use cannabis reform bill is set to open the New Jersey cannabis marketplace, cannabis is still illegal federally. With this being the case, cannabis business operators still face an assortment of issues while sourcing banking and financing solutions.

For cannabis businesses looking for loans, traditional business loans are usually unavailable. This is because of the banks’ concerns regarding Federal Deposit Insurance Corporation (FDIC) insurability. As if this wasn’t discouraging enough for the budding sector, banks taking an interest in collateral for loans issued to cannabis companies may be subject to forfeiture on account of federal illegality. While some providers are willing to provide services that can include small business loans for cannabis operations, there are usually only short-term financing options with elevated interest rates to account for the risk.

Since the cannabis sector isn’t legal federally, the primary payment option for most canna-companies is cash. Besides posing various dangers and security issues, accepting cash in this industry limits sales potential and makes logistics more complex. The banking limitations imposed on cannabis are inconvenient, to say the least.

Even though cash can be convenient for retail shops, business-to-business (B2B) transactions are another story. A cash-basis environment for a multi-billion dollar industry is ludicrous. While some might think paper checks could be a viable option, traditional banking services aren’t always offered, especially by banks with federal oversight.

Credit cards aren’t always an option for cannabis businesses or employees looking to cover their day-to-day costs. These digital solutions would help the industry tremendously. However, without them, many of the current issues surrounding B2B payments become even more problematic.

tracking and reporting challenges cannabis new jersey

Tracking & Reporting Challenges in Cannabis

Compliance is essential for cannabis businesses, regardless of where they operate. For B2B transactions, these companies have to handle the following tracking and reporting challenges to avoid infractions:

  • Supply Chain Concerns – Supply chains vary from state to state depending on the state’s regulations. Throughout the chain, the points include cultivation, extraction, manufacturing, testing, B2B and business-to-customer (B2C) transportation, and wholesale and retail sales. Each of these points demands specific licenses, and it’s crucial to have the right license for whichever role you plan to play in New Jersey’s cannabis marketplace. In some cases, licensees will own every level of the supply chain. These are “vertically integrated” cannabis businesses, and this can minimize supply chain concerns when done right.
  • Tracking & Reporting – Tracking and reporting are crucial for all cannabis operations. But for vertically integrated cannabusinesses, the right software offers the “seed-to-sale” tracking you’ll need to remain compliant. The requirements vary from state to state. However, the market offers various services to handle your reporting, tracking, and processing needs across all points of the supply chain. If your business is not vertically integrated, it could be challenging to find compatible software. With this being the case, your business could demand more data input and processing time while risking errors as it performs B2B transactions.
  • Payment Terms & Trade Credit – Traditionally speaking, businesses use payment terms and trade credits to effectively help with administrative functions and manage their cash flow. However, these practices aren’t always available for cannabis operations. Some commercial solutions exist, but we’re offering highly effective options for outsourced B2B management.

Looking for someone to manage your cannabis business’s licensing, seed-to-sale tracking, and cash flow? Contact us today to learn what we can do to scale your operation.

payment processing cannabis new jersey

Available Payment Processing Options Pros & Cons

Cannabis businesses in New Jersey have a few options for non-cash solutions. The cannabis marketplace in the U.S. has evolved to allow payment processing, despite the various shortcomings. Here’s a list of the available options and risks associated with each:

  • Debit Card Payments – Debit card payments for cannabis businesses are integratable with point of sale (POS) systems. The main benefit of using this payment method in conjunction with your POS system is that you’re ruling out the risk of error during the sale process. However, to make this work, you’ll have to find a bank willing to provide these services, which we can facilitate.
  • ACH Payments – ACH Payments incorporate third-party solutions to make it easier to process customer payments. While this incurs fees on the organizational side, these solutions are integratable with the POS and bypass the risk of error during the sales process. Thus, like with the debit card payment solution, you’ll facilitate compliance and avoid infractions.
  • Cashless ATM Payments – Cashless ATM payments involve having a third-party ATM-like machine for customers to deposit their payments directly to businesses’ bank accounts. While this offers the convenience of cashless transactions and offers POS integration, it’s also capable of operating outside of your POS. However, there’s risk associated with errors in the sales process that directly relates to your chosen service provider. These third-party solutions also charge fees for companies that use these services.
  • Credit Card Payments – Credit cards are another third-party option. Some businesses are willing to take on the risk of accepting credit card payments by using a third-party payment processor. However, if the company is noticed acting out of compliance, there’s a chance that merchants can refuse the revenues the cannabis business has earned. If the money hasn’t been deposited yet, this can be especially problematic. State regulators also tend to look into non-compliance actions, potentially resulting in a company’s license forfeiture.

Looking at the available payment processing options for the cannabis industry, common operational and accounting challenges become even more complex for these businesses. However, we have hope that blockchain and cryptocurrency solutions are the answer. As major companies are backing these solutions for payment processing and B2B payments, it’s increasingly apparent that these options are viable, realistic solutions worth considering.

blockchain and cryptocurrency cannabis market new jersey

Blockchain & Cryptocurrency as a Solution

Over the last few years, Bitcoin has been gaining momentum as a cryptocurrency. While it’s gained a lot of attention, blockchain and cryptocurrency, generally speaking, have become viable options for many businesses – including cannabis.

To fully understand cryptocurrency’s potential to solve the financial woes of cannabis companies, it’s ideal to know about the categories and what they represent for the industry.

  • Decentralized Cryptocurrencies – Decentralized cryptocurrencies aren’t issued or governed by a single entity or small group of organizations. These are rather volatile, with a lot of speculation surrounding them. But the main issue here is the related uncertainty surrounding taxes, reporting, and accounting.
  • Stablecoins – Stablecoins were created to combat the price volatility we see with decentralized cryptocurrencies. While stablecoins are cryptocurrencies, they’re different from others. Stablecoins differ because they’re issued, governed, and managed by single entities or small groups of organizations. These coins are stable because they’re linked to another asset. Most of the time, they’re connected to the U.S. dollar. The result is lower price volatility, which allows them to be used in transactions for various products and services. With this being the case, stablecoin can play a significant role in cannabis businesses’ operations. However, this can be a complex system to implement, and many remain uncertain about blockchain-based tech’s role in the future of business. Thus, some business operators are hesitant (and rightfully so) to implement crypto-based payment systems.

cannabis accounting new jersey

Accounting for Cryptocurrencies

For many organizations, accounting for cryptocurrency transactions is a challenge. However, stablecoins have the potential to be used as an alternative to currency. But, under the current U.S. regulation, these coins are still treated as property.

With this being the case, each time a stablecoin changes ownership, there’s a taxable event. This complicates things for accounting, recordkeeping, and tax compliance action. However, it also offers several opportunities for the people willing to implement crypto-based payment systems for cannabis.

We’ve seen some updates in the regulatory landscape that highlight how wider adoption of crypto-based payment systems could happen, including:

  • Gary Gensler – Gary Gensler is the Biden Administration’s choice to head the Securities and Exchange Commission (SEC). This is a leap forward for blockchain and crypto regulation. While amenable legislation isn’t a sure thing, Gensler is knowledgeable about these topics and will be responsible for proposing and enacting regulations.
  • Updates from the Office of the Comptroller of the Currency (OCC) – Recently, the OCC released two updates that cannabis business operators and practitioners will appreciate. In September 2020, the OCC explained that federally-regulated banking institutions could hold reserve dollars for privately issued stablecoins on deposit. With this update, stablecoin issuers have full access to the services and support of the commercial banking system. The update also made it clear which specific products and services banking institutions can offer stablecoin issuers. In January 2021, the OCC offered an update that federally-regulated banking institutions will be allowed to join permissionless blockchains (independent node verification networks) and validate transactions under the OCC’s jurisdiction.

Through these OCC updates, we know stablecoin transactions are transparent, and banks are accountable for these transactions. Furthermore, these institutions can now purchase, sell, and process transactions with stablecoins backed by the U.S. dollar. Thus, federally-regulated U.S. banking institutions are now capable of joining blockchains and processing these U.S. dollar-backed transactions.

cannabis cryptocurrency new jersey

Marijuana Cryptocurrency Options for New Jersey Cannabis Businesses

Since cannabis business operators are still having trouble using traditional banking services for their transactions due to federal legislation, many turn to marijuana-specific cryptocurrencies. Even though Bitcoin is one of the most popular, alternative coins have been developed to specifically serve the needs of the cannabis sector.

PotCoin (POT)

PotCoin is one of the first cryptocurrencies for the cannabis industry. This crypto was designed with cannabis banking problems in mind. The trades are direct, allowing people to bypass banks and clearinghouses to make their transactions. PotCoin’s creators focused on Colorado’s cannabis legalization, installing a PotCoin automated teller machine (ATM) at a dispensary in the state.

However, PotCoin didn’t have the impact the creators had hoped – at least not at first. But when a press release and video showing former NBA star Dennis Rodman wearing a potcoin.com shirt in North Korea went public, PotCoin re-entered the media spotlight. CoinMarketCap.com reported that this event drove PotCoin’s value up 75% in one day. By November 2020, PotCoin’s market cap nearly reached $1.5 million, which is significant compared to February 2014’s market cap of $81,547.

PotCoin’s supply is limited, with 420 million coins in circulation. At this point, it’s trading on three markets and has transitioned to proof-of-stake, allowing crypto-miners to mine or validate block transactions per the number of coins they’re holding. PotCoin claims its transaction speeds are 40 seconds, and the cryptocurrency has introduced new features that include HD Wallets, faster network synchronization, and reduced sync times.

HempCoin (THC)

HempCoin is also one of the first cannabis cryptocurrencies to hit the scene. This coin was developed for the farming industry and dispensaries. According to HempCoin’s website, it was explicitly designed to “facilitate transactions between marijuana farmers and the local dispensary shops.” But it’s possible to use it to buy gear and tools for cannabis farming.

At this point, HempCoin is being used across the agriculture industry; it’s not limited to cannabis. Thus, it’s safe to say that its use cases are quite vast and impressive, especially compared to other marijuana cryptocurrencies.

CannabisCoin (CANN)

CannabisCoin hit the crypto scene a few months after PotCoin. As a proof-of-work, peer-to-peer open-source currency, the idea behind it was to facilitate transactions for dispensaries.

This cannabis cryptocurrency can be converted directly into cannabis. There’s a line of cannabis medicines and strains being grown specifically to exchange for CannabisCoin, allowing people to purchase 1 gram of medication with 1 CannabisCoin. The supply of CannabisCoin is 91.8 million coins, and over 77 million coins are currently in circulation.

CannaCoin (CCN)

CannaCoin is a cannabis cryptocurrency running on a decentralized blockchain that uses Peer2Peer tech. The currency has been around a while, but it transitioned to proof-of-stake at block 370,000.

Its founders describe this crypto as “a group of cannabis enthusiasts working towards future developments of cryptocurrency applications related to cannabis production, seed production, extract production, glass blowing facilities, vape and dab station manufacturing, crypto development, and more.”

DopeCoin (DOPE)

Adam Howell founded DopeCoin with the mission “to provide marijuana enthusiasts with a modern and secure way of doing business for the 21st century.” Its website says DopeCoin users can make their transactions pseudo-anonymously in less than a minute without paying any fees or transaction costs.

The vision for this coin was to make the Silk Road for marijuana transactions. With 117 million DopeCoin in circulation, it’s limited. But it is also a proof-of-stake currency, offering investors the ability to earn 5% in interest annually.

New Jersey Cannabis Crypto-Based Payment System Implementation

For operations looking to accept marijuana-specific cryptocurrencies, virtual wallets hold and store these coins. This is the same across the crypto industry.

Interested in implementing a crypto-based payment system for your cannabis business in New Jersey? Contact us today for recommendations.

 

Cannabis Grow Facility Lenders: Scale Your Operations

Cannabis Grow Facility Lenders: Scale Your Operations

Cannabis grow facility lenders aren’t a dime a dozen; cannabusiness funding can be challenging to find. But even once you locate a lender, getting a loan to scale grow operations, expand with a dispensary, or open a manufacturing facility is next to impossible without proper documentation.

First and foremost, before comparing cannabis grow facility lender options, it’s crucial to have information about your operation’s finances. This is the first thing we do for our clients, regardless of whether they’re looking for funding now or might in the future.

Between navigating legal complications and strict regulations, we facilitate funding options for cannabis grow facility operators. Whether you need capital for real estate, equipment, or something else, it’s essential to have data available to ensure cannabis cultivation lenders feel confident funding your operation’s expansion.

This article covers some of the most frequently asked questions and solutions for cannabis grow facility capital requirements.

Are you looking for a solution for your grow facility’s financial needs? Contact us today to learn more about how we can help.

Cannabis Grow Facility Lenders

Cannabis Grow Facility Lenders FAQ

Here’s a list of answers to the most frequently asked questions we’re receiving from cannabis grow facility operators:

Cannabis Grow Facility Lenders

What are common types of cannabis loans?

Cannabis endeavors can call for capital infusions to continue operations. Some of the most common loans for cannabis grow facilities include business loans, equipment loans and leasing, manufacturing facility loans, grow operation loans, medical dispensary loans, and recreational dispensary loans.

Banks aren’t always willing to lend money to businesses operating in cannabis. Thus, cannabis grow facility lenders will sometimes issue real estate and equipment loans. But they also provide money for other aspects of the operations, including marketing, payroll, business expansion, and inventory. This funding is generally offered either by lines of credit, cash advances, or short-term loans.

Equipment loans and leasing offer cultivators a way to obtain and upgrade equipment. From lighting to CO2 extraction, irrigation, HVAC, and other aspects of a grow, cannabis cultivation lenders make equipment more accessible.

In some cases, a manufacturing facility loan is the only thing standing in the way of a grow facility expanding its operations. While commercial real estate lenders could fund facilities to manufacture cannabis products, private funding is also an option.

On the other hand, some growers want to scale a cultivation facility. Grow operation loans are available from private investors, bridge loans, and short-term mortgages.

Medical and recreational dispensary loans can be challenging to find. But for growers interested in expanding their operations into retail, private debt or equity financing for recreational and medical marijuana dispensaries are becoming popular options.

However, it’s important to note that lenders will want to see a track record of your operation’s revenue for all of the mentioned options. This is where we can help.

Looking for funding? Get your documentation in order with Northstar first. Contact us today to learn more about how we can help you get the funding your grow operation needs to thrive.

Cannabis Cultivation Facility Lenders

Can you get a loan to open a dispensary?

Sometimes, operating a cannabis grow facility becomes a dispensary venture. When this happens, cultivators find themselves wondering, “Can you get a loan to open a dispensary?”

At this point, U.S. banks will not loan money for dispensary funding. However, other options to obtain capital exist. Learn more about cannabis business loan options available here.

Which lenders offer cannabis loans?

Which lenders offer cannabis loans?

Cannabusiness funding isn’t always as accessible as other business loans. But, in some cases, borrowers may be able to obtain a Construction cannabis loan or a Prime Commercial cannabis loan. However, most of the time, a hard money cannabis loan is the best option available.

Looking for a cannabis grow facility lender? Our connections throughout the industry allow us to offer exclusive access to cannabis loan options. Contact us today to prepare and connect with a cannabis cultivation facility lender.

How much does it cost to open a dispensary in NY?

How much does it cost to open a dispensary in NY?

NY legalized cannabis recently, which was a huge win for advocates. Now that it’s legal, your grow operation has fewer bottlenecks and you have the opportunity to sell cannabis in a retail setting.

But how much does it cost to open a dispensary in NY?

Opening a dispensary in NY involves application fees. Upon applying for a cannabis dispensary license in New York, you can expect to pay $210,000. If your application is denied, they’ll reimburse you for $200,000.

License fees for a producer or dispensary license in New York costs $200,000. Cannabusiness operators must comply with NY’s regulations by renewing their license every two years to keep it active.

How much do I need to open a dispensary in California?

How much do I need to open a dispensary in California?

Opening a dispensary in California can be a profitable venture for growers. Direct access to this massive consumer base can increase your yield’s profits tremendously.

So, how much does it cost to open a cannabis dispensary in Cali?

On average, opening a dispensary in California has an up-front investment that ranges from $80,000 to $250,000. However, it’s crucial to note that the ongoing operating expenses range from $30,000 to $70,000 monthly.

How much does it cost to open a recreational dispensary in Colorado?

How much does it cost to open a recreational dispensary in Colorado?

Opening a recreational dispensary has the potential to give your cannabis grow facility an outlet to reach consumers directly. But how much does it cost to open a recreational dispensary in Colorado?

For the initial license fees, you can expect to pay between $5,200 and $13,200. Renewals are slightly more expensive. If you’re opening a retail operation, you can expect to pay somewhat less with application fees costing $5,000 and an initial license fee of $3,000. 

How do I open a dispensary in CT?

How do I open a dispensary in CT?

Considering opening a dispensary in CT? Now is the time to do it. Opening a dispensary has the potential to give you access to consumers ready to purchase your high-quality flower.

Here’s what you can expect to pay when you open a dispensary in Connecticut:

  • $1,000 for your Dispensary Facility License Initial Application Fee
  • $100 for your Dispensary License (Individual) Initial Application Fee
  • $100 for your Dispensary Facility Backer Initial Application Fee
  • $50 for your Dispensary Facility Employee Initial Application Fee

Interested in cannabusiness funding for a cultivation facility, dispensary, or manufacturing facility? We’ll facilitate the entire process! Contact us today for expert financial assistance.

Cannabis Business Financing Options

Cannabis Business Financing Options

Financing options for cannabis are becoming increasingly common. With so much progress happening in this budding sector, it makes sense that the lenders serving it are offering business operators the chance to finance.

Lenders understand how challenging it is to fund cannabis businesses. But even if you’ve been operating a cannabis company for years, you might not be aware of the cannabis business financing options available.

What’s the benefit of financing in the cannabis sector? For starters, you’ll free up more of your cash-on-hand to allocate towards other aspects of your operation.

We’ve covered cannabis business loans. But what are the other options?

That’s precisely what we’ll discuss in this article.

Looking to optimize your cannabis business’s financials? Contact us today to learn more about how we can prepare your operation to scale.

cannabis financing options marijuana cbd banking services

What are the financing options available to cannabis business operators?

Conventional funding for cannabis isn’t always available. Small business loans for cannabis startups and dispensaries aren’t easy to access because of the intense regulations surrounding this industry.

Getting a business loan for a dispensary in Colorado or California might be more straightforward. But it’s still a challenge to get a cannabis business loan in thriving legal markets. Since federal law bans small business loans for marijuana businesses from federally regulated institutions, the state-level legality doesn’t matter.

Two of the main kinds of financing options available to cannabis company operators are debt funding and equity funding. Through debt funding, you’ll finance your business by taking out loans or utilizing a business credit card. You’ll then pay the lender back the sum of the loan plus interest.

Equity funding is a little different. This involves trading shares of your company for the capital you need. The lender is an investor, receiving their investment back in dividends or profit once the business sells.

For equity funding, the company already exists and has value. But debt funding using loans and credit is the go-to option for most new cannabis startup operators.

Companies that issue invoices can use invoice financing too.

cannabis financing options marijuana cbd

What is invoice financing?

Invoice financing for cannabis is becoming increasingly common. Many cannabis operations have long lead times on open invoices. This usually means waiting between 30 and 90 days for payments on open invoices, resulting in cash flow lag.

Cash flow lag is a serious issue in cannabis because the business has to wait for the balance. Through invoice financing, cannabis businesses can get partial repayment for outstanding invoices.

Most commonly, we see cannabis brands, cultivators, distributors, and manufacturers using invoice financing. But ancillary companies utilize it for flexibility and consistent cash flow benefits too.

With invoice financing, the only interest accrued is from using the funds. You’ll be able to borrow for up to 90 days, and the fees are around 2.5 to 3.5 percent of the invoice amount. Then, the fees are assessed every 30 days.

Here’s how invoice financing for cannabis works, step-by-step:

  1. You issue an invoice for goods or services. This invoice is due in 30 days, and you request invoice financing.
  2. Part of the invoice total, usually around 80 percent, gets deposited directly into your account from your lender.
  3. You use these funds as needed to increase production, profits, or something else. Financing fees begin to accrue and continue until the remaining balance is paid in full to your lender.
  4. Once the invoice is paid in full to your lender, the lender pays the invoicing company and keeps the accrued fees.

In some cases, inventory financing is the best option for a cannabis operation.

cannabis financing options marijuana cbd

What is inventory financing?

Inventory financing is an accessible short-term loan cannabis companies can back with inventory. This type of financing balances your business’s cash flow while offering funds you can use to buy more inventory or cover other expenses.

You’ll have your lender pay your vendors. Then, you can get cash-on-delivery (COD) pricing, which saves you money while you scale your business.

Through inventory financing, cannabis cultivators, distributors, brands, dispensaries, manufacturers, and ancillary companies achieve flexible financing that encourages solid vendor relationships and discounts. Using the inventory financing model, you’ll ensure your vendors are paid directly, with interest accruing when you use the funds.

You can borrow these funds for up to 90 days. The fees range from 2.5 to 3.5 percent of the invoice amount, and they’re assessed every 30 days.

Here’s how inventory financing for cannabis works:

  1. Your vendor ships the products to you and issues an invoice that’s due in 30 days. You request financing.
  2. Your lender sends an advance for the entire invoice amount to the vendor, covering the cost of your products.
  3. You receive and sell the products.
  4. You pay the lender back the invoice amount plus any accrued interest and fees.

cannabis financing options

Common Cannabis Business Financing Options

Equipment Leasing for Cannabis Operations

Growers looking to purchase farming equipment have access to special financing. Equipment leasing is becoming increasingly common for cannabis cultivators who would rather avoid buying the equipment outright. These leases usually have interest rates between 8 and 20 percent, with terms ranging from one to seven years. This is a quick option with leases typically available within five to fourteen days.

Cash Advances for Dispensaries & Other Cannabis Businesses

Dispensaries can find it challenging to find the funding they need. This is where cash advances can truly shine.

Unlike a loan, to receive a cash advance, dispensaries must have proof of strong revenue. The factor rates range from 1.30 to 1.49, with terms ranging from four to 12 months.

Funding is accessible fast, usually within one or two days. For dispensaries that need to raise capital quickly on a short-term basis, this option is available. But cash advances are one of the most expensive options, so we advise using it only if you absolutely must.

cannabis financing options

What are the financing options available to cannabis business operators?

Conventional funding for cannabis isn’t always available. Small business loans for cannabis startups and dispensaries aren’t always an option because of the intense regulations surrounding this industry.

Getting a business loan for a dispensary in Colorado or California might be easier. But it’s still a challenge to get a cannabis business loan in thriving legal markets. Since federal law bans small business loans for marijuana businesses from federally regulated institutions, the state-level legality doesn’t matter.

Two of the main kinds of financing options available to cannabis company operators are debt funding and equity funding. Through debt funding, you’ll finance your business by taking out loans or utilizing a business credit card. You’ll then pay the lender back the sum of the loan plus interest.

Equity funding is a little different. This involves trading shares of your company for the capital you need. The lender is also an investor, meaning they receive their investment back in dividends or profit once the business sells.

For equity funding, the company already exists and has value. But debt funding using loans and credit is the go-to option for most new cannabis startup operators.

Get Cannabis Business Financing

The cannabis sector is full of financing options. But the key to it all is to have the right documentation while forging connections throughout the industry.

Interested in organizing your business’s financials to ensure financing is always an option? Contact us today for expert assistance.

Where Can You Get a Cannabis Business Loan?

Where Can You Get a Cannabis Business Loan?

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.

marijuana business loan funding

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.

cbd business loan funding

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.

cannabis business loan funding bank traditional banking

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

cannabis private loan funding

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.

cannabis real estate loan funding

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

cannabis business loan funding

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.

cannabis business loan funding

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.

cannabis business loan funding

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 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.

How to Determine the Break-Even Point for Your Cannabis Dispensary

How to Determine the Break-Even Point for Your Cannabis Dispensary

Sometimes, business owners don’t consider their break-even point. But knowing when you’ll become profitable means understanding how to calculate your break-even point. This is also how you’ll bypass the inflated numbers to reveal how long your profitability will take – with expenses in mind.

All too often, we see catchy headlines marketing to the masses. They proclaim how cannabis dispensaries are earning millions of dollars each year. These figures sound too good to be true, and that’s because they’re focused on the gross revenue.

But we need to bypass gross revenue and determine how much your dispensary earns after factoring in expenses. This is the right way to judge your business.

The first step is understanding break-even point meaning and how to calculate it.

Net income and net margins have their roles to play. With this information, you’ll know what you should set aside for taxes. And this ensures you effectively manage your costs.

The value in knowing your costs is knowing when your dispensary will be in a better position to become profitable. In this article, we’re covering what a break-even point in accounting is and the calculations you can do to uncover your dispensary’s break-even point.

What is a Break-Even Point (BEP)?

A break-even point in accounting for cannabis is the point when your costs and total revenue are the same. For instance, if you’ve invested $100,000 in your dispensary, you’ll break even when your total profit reaches $100,000.

But according to Investopedia, conducting a break-even analysis is as easy as dividing the fixed costs by the price per unit minus the variable cost of production. While this is a simplified definition, it highlights that your business’s goal should be to hit this point early on in its lifecycle.

After reaching your break-even point, the next step is to achieve profitability. This is when your revenue grows beyond your costs. Typically, the break-even point for a cannabis dispensary involves:

    • People – The wages and benefits for the people working in your dispensary.
    • Products – Think about where and how you source your products.
    • Space – Real estate regulations mean you have limited options for spaces.

For every break-even analysis example, your expenses won’t always be flexible. However, you can adjust some of them to determine what will work best to achieve profitability. For instance, you can cut the cost of your products by sourcing from somewhere else. You can also hire fewer staff or adjust the hours they work in your dispensary.

Calculating the Break-Even Point for a Cannabis Dispensary

As you calculate your cannabis dispensary break-even point, these are the variables to consider:

  • Average Sales Order – To calculate your average sales order, add all of your sales and divide the sum by the number of transactions.
  • Average Monthly Contribution Margin – To calculate your average monthly contribution margin, you’ll add your cost of goods sold (this should include shipping and any other direct costs) and divide it by your revenue. Keep in mind that this does not account for your taxes, which will take between 7% and 10% of your margins.
  • Average Monthly Fixed Costs – Combine all monthly fixed costs. This should include your bank/merchant fees, licensing fees, office supplies, software subscriptions, total payroll, rent or mortgage, utilities, and any other expenses you pay every month.

With this information on-hand, you can determine your break-even point, as well as how many sales per day or per month you’ll need to make to break-even. While a break-even point calculator will make this easier, some simple math can produce results too.

As a break-even point example, suppose your average sales order is $200 and your average monthly contribution margin is 50%. Your monthly fixed costs are $3,000 and you’ve invested $100,000 in your dispensary. With these numbers, you can calculate the number of sales per month or day to break-even. If you want to break-even in 6 months, you could uncover daily, weekly, and monthly sales targets.

In this break-even analysis formula, you’d multiply the number of months (6) by the monthly expenses ($3,000). Then, you’d add that to what you’ve invested ($100,000). This equals $118,000.

You’d then divide $118,000 by 50% of your average sales order ($200). This shows you’d need 197 orders per month to reach your break-even point in 6 months.

This math can also be applied to calculate how many orders you’d need per day, week, year, etc. However, keep in mind that you’ll need to include local state and federal taxes in your calculations.

What to Do After You Know Your BEP

Once you know your BEP, you know your sales targets to maintain your progress. While sales will fluctuate from day to day, this offers insight that can guide your marketing and management decisions.

Now that you have information contributing to your operation, you should maintain a sales journal. With a sales journal, you’ll track your sales, the number of transactions, and other relevant information. As you continue updating your sales diary with relevant information, you can look back to gain more insight regarding your business’s sustainability and how to maintain and grow it.

A sales journal allows you to look back at the days you’re not breaking even. There could be a trend that reveals when and why certain days aren’t profitable. This will allow you to take action and determine where you can cut costs and increase your chances of making a profit on those days.

You might decide to cut costs. This will involve checking your variable costs. You may be able to cut costs by scheduling fewer hours for your team. Or perhaps you can decrease your marketing costs for the days you’re not profitable.

Another option is to sell more product on those days. This could involve some creativity. For example, you could try hosting events or running a promotion on those days to increase profits and cover your overhead costs.

Most of the time, the best option is to market profitable items. This isn’t always the priciest product you sell. You’d focus on selling the products that offer the best margins. For many dispensaries, this product is pre-rolls.

Running percentage discounts isn’t always the best choice. Some customers will alter when they purchase to ensure they’re buying during times you’re offering a discount. The goal here is to get your customers to spend more and get a better deal simultaneously.

After you know what’s causing your unprofitable days, it’s also important to determine what’s causing your most profitable days. Perhaps some employees are making those days better. Or maybe other external factors are coming into play. Your sales journal should highlight macro-trends you can use to improve your dispensary’s profitability.

While data can be tedious, this is the business end of things. With more in-depth data, you can ensure your dispensary’s long-term and sustainable success as you serve consumers.

Need a financial analysis of your dispensary? Looking for help with your dispensary accounting? Feel free to contact us today.