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.

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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.

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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.

Must-See Tips for Cannabis Dispensary Cash Handling

Must-See Tips for Cannabis Dispensary Cash Handling

Cash management is crucial for any small business. But when it comes to operating in the cannabis sector, inappropriately managing cash can become a severe issue.

This industry is characterized by inaccessible banking services that force many cannabusiness operators to handle transactions in cash. With this in mind, strong cash handling policies can ensure your dispensary’s survival.

For instance, without the right cash handling methods, sales tax can become a serious problem if you don’t correctly pay it. But if you’re dealing with cash transactions, sales tax is money that belongs to the state.

One significant issue is that companies tend to misuse cash that should be put to the side for sales taxes. Instead, they use this money on operating expenses. Then, when incoming cash flow pauses and sales tax bills are due, cannabis business operators have problems with the IRS and other state authorities.

It’s crucial to know which cash belongs to you and how much to set aside to pay your taxes. Understanding your operating capital cash ensures you know what you’re working with and what belongs to the state.

With this in mind, try these tips to manage your cash:

Get Informed on State, Local, and Federal Taxes

If you’re managing cash on your own, stay up to date on the state, local, and federal taxation. But if you’re working with a CPA, make sure they’re experienced in handling cash for cannabis businesses. Your CPA should be able to teach you about the percentages and calculations you’ll need to set aside cash to pay your taxes.

Your CPA will explain whether your taxes are based on gross receipts, the base that your tax rate is calculated on, and other information about your taxes. This information will vary depending on what you do, so speaking with an expert about your situation can shed some light on it.

For example, dispensaries should have some sort of target revenue monthly, quarterly, and annually. This allows you to calculate what you expect your tax bill to be for each period. With this insight, you’ll have a good idea of what you should set aside to cover your taxes. 

Set an SOP for Cash Reconciliation

Once each day ends, reconcile your cash on hand using your POS system. This is how you’ll ensure there hasn’t been a theft or diversion.

Your team should have a standard operating procedure for handling cash. Here’s what your procedure should cover:

  • Where cash is kept
  • How cash is counted and who is responsible for counting it
  • If your business has a bank account, the bank’s location
  • How the cash is to be transported from the business to the bank
  • Where the safe is located
  • What type of safe you’re using

Set Aside Cash for Regulating Agencies

Compliance is essential in the cannabis sector, and your business must remain compliant with regulations set by the state, local, and federal agencies. Cash should be put aside for taxes, but also for license renewal fees and potential penalties you might incur.

Handling your cash flow involves putting cash aside to manage every aspect of your business. This should also include an emergency fund that’s capable of covering your company’s operating expenses for at least 60 days. Emergency funds can be a serious blessing in instances when you find yourself dealing with an unexpected expense like a high tax bill or something else.

Use Banking Services for Cannabis

Sometimes, it’s challenging to get a business account for a cannabis endeavor. However, it’s not impossible. If you have a business bank account, make your cash deposits at least two or three times weekly.

If you can, deposit cash into separate accounts to hold your tax money. But if you can’t separate your cash, make sure you have at least 115% of what you estimate your tax bill will be in your account.

Incorporating a Drop Safe

While a drop safe isn’t always a priority, it’s one of the most effective ways to keep your cash safe and ensure you’re allotting money towards everything you need to handle. A drop safe physically separates the cash you have into categories. For instance, you can have a drop safe for taxes, another for operating expenses, one for payroll, etc.

You should only grant access to your drop safes if it’s essential. The fewer people with access, the better. The only people who should have access are the owner, their lawyer, and perhaps a designated cash handler. Recording each drop in a cash log is also recommended because this will help with reconciling your dispensary’s cash at the end of each month.

For Digital Payments, Separate Your Income from Taxes Automatically

Some merchant processors will let you automatically set aside income money from tax money. For example, if you’ve recorded $1,000 through your POS, you can set the system to deposit part of that money into separate accounts automatically. You can set it to send 10% into your sales tax account, 20% into an account designated for state and federal taxes, 10% into a city tax account, and everything else into your main account.

Incorporate Counterfeit Cash Detection Procedures

Your employees likely haven’t been properly trained to spot fake bills. But that won’t stop the government from taxing you based on fake cash your employees have accepted.

With this in mind, avoid paying taxes on fake cash by incorporating counterfeit cash detection procedures. You also have the option to use a device that checks for authenticity. 

Hold People Accountable for Their Tills

Cannabis cash handling demands accountability. Someone, whether it’s your general manager or shift manager, should be responsible for counting the cash at the state and end of each workday.

The cashier or budtender responsible for the till should watch as the GM or SM counts the money. They should then sign off on the count in or out. Once this is completed, whoever is in charge should reconcile the cash with the day’s sales. This should all be done in a recorded room that offers clear views from all angles.

Need help determining the best course of action for cash management at your dispensary? Contact us today to learn more about how we can help.

Outsourced Cannabis CFO vs. Hiring In-House

Outsourced Cannabis CFO vs. Hiring In-House

Business operators often can’t help but wonder, “Should we hire a CFO or Controller, or should we try to do it ourselves?” However, there’s another option that’s often overlooked; outsourced cannabis CFO services.

Managing finances is essential for any business. This is especially true for businesses that are growing.

But up until around ten years ago, small business owners had to hire an in-house CFO. Until recently, they didn’t have the option to hire an outsourced team.

Today, business operators across all industries can benefit from outsourced CFO services. And with the cannabis industry experiencing incredible scaling capacity, these services are becoming vital for avoiding finance-related bottlenecks that hinder business growth.

Regardless of the industry, the majority of business owners believe that hiring in-house is the best option to have someone handle paying bills, running payroll, and managing company finances. However, for many cannabusiness operators, an outsourced CFO and accounting department is a better solution.

In this article, we’ll discuss the benefits of outsourced CFO services over hiring in-house and how outsourcing a cannabis CFO is a solution that will help you scale your company.

Outsourced Cannabis CFO vs. Hiring In-House

Hiring a cannabis CFO in-house means you’re assigning the majority of, if not all, of the financial responsibilities of your cannabusiness to a single individual. Now, while this person might be an expert, there’s a good chance that they’ll have more work than they’re capable of handling. This is especially true if your business is in the process of scaling.

Another problem with hiring a cannabis accountant in-house is that while they might be skilled in some aspects of your business, they could lack expertise in other areas. In turn, you could be putting the financial health of your business at risk by hiring one person to do several finance-related jobs.

Outsourcing cannabis accounting and finance functions brings an entire team’s expertise into your business. With this in mind, an outsourced cannabis financial services team will have experts in multiple aspects of your business’s finances on hand to handle each aspect of your cannabusiness’s finances.

With more expertise ready to assist, cannabis business operators improve their financial reporting accuracy. Furthermore, these business owners obtain several layers of oversight, ensuring mistakes and potential fraud are found before they become a severe issue.

Outsourced Cannabis CFO Services More In-Depth

Using an outsourced cannabis financial team also changes your cannabusiness at higher levels. Since many small and medium-sized canna-companies don’t have the financial backing to bring on a full-time CFO, outsourcing is an economical option. The lower levels of most cannabis organizations can benefit from outsourcing financial services too.

Per 280e, plant-touching companies cannot deduct finance and accounting expenses. Therefore, hiring in-house not only can be very costly, but can also harm cash flow by being non-deductible.

Outsourcing also eliminates the overhead, HR, and administrative burdens that come with hiring in-house. When you outsource a cannabis CFO, you’re using efficient and lean structuring that can provide cannabis-specific expertise at a fraction of the cost of an in-house team.

Bringing an outsourced cannabis CFO gives you access to their expertise when you need it too. As a result, you’ll save more when you need fewer services. For instance, your cannabis operation could be going through a period of tremendous growth. In this case, you’d need more financial services to meet your business’s needs.

However, if your business is operating smoothly, you have a financial plan in place, and you’re abiding by annual budgeting that’s already been established, you might not need to have your outsourced accountant working as much. The less your CFO works, the less you have to pay. And this allows you to dedicate that money elsewhere.

Best Practices From Multiple Industries Working for You

Hiring in-house usually means you’re hiring someone who is knowledgeable in specific areas. But working with an outsourced cannabis CFO, you have access to experts who have worked across many industries.

The exposure to other industries allows your financial experts to spot potential weaknesses or opportunities for your cannabusiness. Thus, you have knowledge and data backing each of your business’s moves.

With knowledge of the best practices across other industries paired with GAAP (Generally Accepted Accounting Principles), your cannabis business receives the right financial services to keep it operating smoothly. Since the cannabis industry is highly regulated, this is essential to ensure your business’s success.

The right outsourced cannabis accountant will introduce efficiencies and organization to your cannabis business’s operations, contributing to your wins and steering you clear from potential losses. As tax season approaches, there’s no need to fret as you’ll know everything is being handled as it should. The experience of an entire team working on your business’s finances ensures you’ll never need to worry about pricey infractions.

Standardized Reporting to Make Documentation Simple

The majority of CFOs have personal preferences for how they’re formatting documents, reports, and files. This is especially true when they’re the person handling all of the documentation for your business. While this can work, it’s possible that they will not adhere to the standard practices within the cannabis industry.

In an industry characterized by strict restrictions and pricey infractions, standardized reporting is crucial for success. With a part-time cannabis CFO, you’re more likely to have someone who will adhere to these accepted reporting standards. Since they already work with several cannabis companies, they already understand the importance of sticking to what works for this industry.

Standardized reports make tax season easier. From handling your taxes to reporting and handling legal issues, a fractional cannabis accountant will keep everything organized with standardized reports and make sure that in the case of an audit, you’re prepared.

Some Problems Outsourced Cannabis CFO Services Help Business Operators Overcome

Outsourced cannabis financial services aren’t for every business. But it can be a valuable change in many canna-company operations.

Bringing outside help could be beneficial in many instances. These are just some of the times an outsourced cannabis accountant is ideal:

  • Your company is experiencing exponential growth and demands an increase in oversight and financial management.
  • Your office manager is stuck handling your company’s bookkeeping while scaling your business.
  • Your in-house bookkeeper quit without giving much notice, requiring a fast solution to your financial management woes.
  • You’re preparing your business for a sale.
  • You’re looking for ways to increase your profitability.
  • You feel your bookkeeping practices are overly complex, and you feel that the accuracy of your financial statements could be in jeopardy.

All of these situations can be alleviated by bringing in an external cannabis accountant. These issues are especially common in cannabis, so don’t worry! You’re not alone in needing some additional assistance handling your cannabusiness’s finances.

Looking to outsource your CFO responsibilities? Feel free to contact us at any time to learn how our cannabis financial services can improve all aspects of your business’s finances.

Increasing Cash Flow For Your Cannabis Business With a Sale-Leaseback

Do you own a cannabis business? 

Then it’s no news to you that cash flow is one of the main, if not the main, issues for a cannabis business. That’s why owners of businesses like marijuana dispensaries, cannabis distributors, and cultivators are always on the lookout for new ways to solve the cash flow issue. What’s an innovative way to raise money for your cannabis businesses? Many are turning to the sale-leaseback.

But let’s take a step back and explore just why it is that cash flow is at the top of every cannabis business owner’s mind. 

 

Lack of Federal Legalization and Limited Cash Influx Options

Because cannabis is still illegal at the federal level, there are many regulations and restrictions that create disproportionate challenges for compliant business. Yes, even for those operating even in state legalized communities. The 280e tax code being a prime example, as well as the restriction on federal banks from providing financing options, or any finance services at all, to cannabis businesses. 

Many smaller banks are hesitant to take on cannabis entrepreneurs as clients because of both the legal intricacies and the cultural stigma around the industry. (Though many Americans are starting to view things differently thanks to state legalization.)

This leaves cannabis business owners with the need to be more resourceful than entrepreneurs who are involved in other, less-regulated industries.

Luckily, there are a few investors and investment firms out there who believe in the cannabis industry. They’re willing to take the risks involved with the promise of a national-boom that many believe is to come in the very near future. And, for the time being, those risks are unfortunately quite real.

 

Unpredictable Performance in the Stock Market

The sad fact is that not enough investment firms are jumping on the bandwagon. And why is that? Because the cannabis industry is still extremely volatile. After the record-breaking stock prices the cannabis industry saw at the start of last year, cannabis stocks plummeted from the second quarter onward, and they haven’t recovered since. 

While businesses in other industries may consider providing more shares to investors, the consensus among financial experts—especially those specializing in the cannabis niche—is that doing so for a cannabis businesses would be a bad idea. Issuing more shares in a cannabis company, especially if the industry has been performing so poorly in the market, waters down the worth of each share, and therefore the networth of the cannabis company.   

This leaves the cannabis community with the question of what happens next. Currently, there are two levels of action that are being set in motion: the on-the-ground solution that individual cannabis business owners are turning to, and there’s a more forward-thinking push for change at the legislative level.  

 

The SAFE Banking Act  

Introduced last year by Ed Permlutter, Democratic representative from Denver, Colorado, the Secure and Fair Enforcement (SAFE) Banking Act allows for the creation of financial institutions that provide financial services to cannabis businesses in legalized states. 

While many similar legislations have been proposed, this was viewed by many as the bill that might actually make it through. It passed in the House of Congress by a landslide, and was largely starting to be regarded as a bipartisan, apolitical concern. 

Hype notwithstanding, it will soon be a year since anything has been done with that bill. The more practical-minded are losing hope that it will ever progress in any significant way. After all, say experts in the industry, If progress were to be made, it would have done so already. The fact that it didn’t pass was quite a blow to the cannabis community, which could have greatly used a break, for once. Being able to receive financing options from banks would mean less leg-work, less need for creativity, and somewhat drastic measures… like the sale-leaseback. 

Drastic as it is, the sale-leaseback is a viable option for many cannabis entrepreneurs out there. 

 

The Sale-Leaseback: One Of Today’s Most Popular Solutions

Also known as just “leaseback” for short, the sale-leaseback is a process in which you sell the real estate your business is operating out of, then lease that property back as a tenant. 

As with all things, there are pros and cons that have to be weighed out before taking the leap, like effects on monthly budgeting. Here’s what you need to know about unlocking funds with a sale-leaseback for your cannabis business:

sale leaseback cannabis

Some cannabis businesses are selling their properties on a leaseback deal, for quick cash. (Image: freepik)

1. The sale-leaseback provides your cannabis business with a significant influx of cash flow all at once. 

True, you’ll still be spending money on renting the space back each month, but whereas that is an expense stretched out over time, the money you get immediately can be used to grow your business in the meantime. 

There is also the question of how being a tenant may affect your business. Being the King/Queen of the Castle allows for pride in your space and freedom in your business. But with the right contract and the best terms, there will be very little impact, if any, on the day-to-day operations of your business.

 

2. Some of the most successful cannabis businesses have negotiated leasebacks for their businesses.

Cresco Labs, Acreage Holdings Inc. and Canopy Growth Corp. are the most high-profile examples of recent leaseback deals that were made. In fact, even while these companies were acquiring and merging, they relied on the leaseback to cover their bases, so to speak.

 

3. To fill this need, there are real estate investment trusts (REITs) that have a niche in the cannabis industry. 

The greatest comfort in having to sell your place would be knowing that you can be a tenant with terms that are ideal for your business. Some other landlord who does not understand the needs of, say, a cannabis sativa cultivator, or a producer of CBD oil and edibles, may provide terms that restrict your business’ operations. Not so with a company like GreenAcreage Real Estate that was created for this exact purpose, and has a solid grasp of what’s par for the course when it comes to having a cannabis business as a tenant. 

 

4. It’s not right for every business. 

Some businesses found that the sale-leaseback was not right for their cannabis business. Perhaps your mortgage terms won’t allow you to receive enough cash on your property, or the lease would be much higher than monthly-mortgage rates. 

These and other valid concerns are why no business should make these decisions without the guidance of a financial professional. 

If you would like to explore the idea of a sale-leaseback for your business, or other cashflow solutions, contact us today. Call now: +1.424.274.3188