California cannabis business taxation is in a constant state of motion. With each update, it becomes more crucial to remain up to date on the regulations in place, which is why we’re covering Cali cannabusiness taxes and the latest updates to keep in mind.
Need someone to handle your cannacompany’s financials? Contact us today to learn more about how our fully-integrated financial partner model will scale your cannabis business.
California ensures all retail sales of tangible personal property are taxable. However, in some cases, the law might provide specific exemptions. Cannabis and cannabis products fall into the tangible personal property classification and do not have a specific exemption, which means sales of this property are subject to sales and use tax.
California Cannabis Excise Tax & Cultivation Tax Insight
Retail purchasers of cannabis or cannabis products must pay a 15 percent excise tax. This tax is determined in accordance with the average market price of the cannabis or cannabis products as they’re sold in a retail setting.
Furthermore, harvested cannabis has a cultivation tax upon entering the commercial market. This is the responsibility of cultivators, and the tax is based on cannabis weight and category. These are the three categories in place:
Fresh Cannabis Plant
Qualifying for the fresh cannabis plant category means weighing the unprocessed cannabis plant within two hours of harvesting.
The CDTFA must adjust cultivation tax rates annually for inflation. However, Assembly Bill 1872 ensured that cultivation tax rates would remain the same for the entire 2021 calendar year. However, beginning in 2022, the CDTFA plans to adjust cultivation tax rates in California.
Registering for a Sales and Use Tax Account & a Cannabis Tax Account in California
You can register for your sales and use tax account and a cannabis tax account or add your business location to your existing account online here. If you already have a username and password, log into your account to register.
To register for your cannabis tax account under your existing username, you’ll click on the More link in the I Want To section. From there, you’ll select the Register a New Business Activity on the Online Services homepage, choosing Cannabis business activities to begin. Then, you’ll enter your information.
Besides registering with the CDTFA to acquire the essential tax permit(s), you’ll also have to get the right cannabis business license(s). Cannabis cultivators get their licenses from the California Department of Feed and Agriculture. Cannabis manufacturers obtain licensing from the California Department of Public Health. Cannabis distributors, microbusinesses, retailers, and testing laboratories receive licensing from the Bureau of Cannabis Control at the California Department of Consumer Affairs.
Business operators also must contact their city and/or county government office to obtain information on which local licenses, if any, they’ll need. Here’s some insight from the CDTFA that should give you a good idea of which permits and licenses you might need:
Seller’s Permit Requirements for Cannabis Businesses in California
If your business doesn’t sell tangible property in California, you don’t need to hold a seller’s permit. But if you need to meet the state’s commercial cannabis licensing application requirements, you’ll still need a certification letter from the licensing agency. This letter explains that a seller’s permit is not necessary.
Once the CDTFA receives your email, they will review your information. If you’ve provided enough information, you can expect a certification letter mailed to the address you provided. However, if they need more information, they’ll reach out to you directly.
California Marijuana Business Filing and Payments
Sales and Use Tax Return
If you sell cannabis, you’ll need to file regular sales and use tax returns to report your sales. However, even if you don’t have taxable transactions to report, you’ll still have to file your sales and use tax return. Also, you still must report your activities to the CDTFA.
Cannabis Tax Return in California
If you distribute cannabis or cannabis products, you must electronically file your cannabis tax return with the CDTFA. This is how you’ll report how much cultivation tax and cannabis excise tax you owe. If you don’t have taxable transactions to report, you’ll still have to file your cannabis tax return and report your activities to the CDTFA.
You’ll have to file your cannabis tax return by the last day of the month after the reporting period. Keep in mind, your cannabis tax account is separate from the other accounts you might have with the CDTFA.
Paying California Cannabis Taxes in Cash
Many Cali cannabis business operators pay their sales and use tax or cannabis tax in cash. If this is something you’re considering, you’ll need to contact the CDTFA to arrange the transaction and request an exemption from its No Cash policy.
The CDTFA grants exemptions if a cannabusiness operator must pay in cash to avoid undue difficulties. You can fill out a No Cash Exemption Request form to explain your business’s operations and why you cannot establish a bank account or pay using a cashier’s check or money order. Once your request is approved or denied, the CDTFA will notify you in writing, offering more information on how you should proceed.
Once you’re approved to pay in cash, you’ll need to contact your local office to schedule an appointment to pay at least 21 days before the payment is due. If your estimated monthly tax liability exceeds $20,000 for cannabis tax accounts or $10,000 for sales and use tax accounts, you’ll have to pay by electronic funds transfer (EFT). If you don’t pay by EFT, you’ll be charged a 10 percent penalty. However, if you receive approval to pay in cash, you’re excluded from this EFT requirement.
California Cannabis Business Tax Assistance
We monitor California’s cannabis regulations for our clients, and we’ll stay up to date on them for you too. Contact us today for expert assistance managing your business’s financials.
With more regulation now than ever before, the cannabis sector demands good decisions to succeed. But how to make the best decisions for your cannabis company?
Use this actionable list to ensure your cannabis business decisions guide you through many of the most common challenges in the cannabis sector.
Interested in implementing these actions? Contact us today to learn more about how we can help.
Have a Cannabis Business Strategy in Place
The right cannabusiness strategy should outline your plan going forward, outline present- and long-term business objectives. Since the cannabis sector has so many moving components, you should be able to highlight an area that’s aligned with your company’s strengths.
For example, if you’re operating a cannabis nursery out of Oregon, you might have access to some of the most fertile soil in the US. The Willamette Valley is known for its living soil, and if you can take advantage of that for your grow, you can likely produce high-quality organic products that can compete with top brands.
Checking every box in a niche is challenging. But if you outline where your company fits and why, along with which niches you’ll target today and in the future, you have a better chance of succeeding in the cannabis space.
Even though many cannabusiness operators believe in scaling impressively, some are interested in sustainable approaches. Starting and maintaining a “mom-and-pop” style operation that supports your lifestyle is still a fulfilling option for some.
However, for those interested in a higher potential for revenues operating a larger, commercialized cannabusiness, it’s within the realm of possibilities. This is something that we can help you with.
Looking to scale your cannabis operation? Contact us today to learn more about how our services facilitate and support your growth.
Track & Analyze Key Cannabusiness Metrics
Your key cannabusiness metrics will vary from niche to niche. But one thing remains the same; you’ll use these metrics to show critical success factors. Your metrics should help you identify areas for improvement, along with how aligned you are with your projected operating costs.
For instance, cultivators use various metrics to measure their successes and shortcomings. These usually include average yield, yield per square foot, yield per watt of light, production per acre, fixed costs, variable costs, and stain cultivation. This offers insight into how much product they’re generating, as well as how each variable could be affecting their yields.
Metrics are also necessary for interested third parties, like investors. If you’re seeking investment, potential investors will want to analyze the metrics to evaluate your operation, comparing it to the competition. Your metrics will also add credibility to your operation.
Software for cannabis recordkeeping can work, although the options for accounting software for cannabis aren’t robust enough to handle all aspects. This is why we recommend keeping a log of everything and using Excel or Google Sheets for recordkeeping to all of our clients.
Your metrics allow you to focus on what works by putting the data on display. Rather than growing 30 strains with 25 unsuccessful, cultivators can concentrate on the five successful strains that dispensaries purchase. The same train of thought works for other cannabis operations.
Organize Your Books
As a cannabis business operator, having your financial framework and processes organized facilitates your success. Most of the time, this means hiring a CPA specializing in cannabis.
Cannabusinesses are under more scrutiny from regulators. These governing bodies are usually quite strict with their regulations, dishing out costly infractions without hesitation.
Section 280E makes it challenging for cannabis operations to deduct expenses. This is something that will continue until cannabis is reclassified. Cannabusiness operators cannot write off their rent, payroll, and other common business expenses – unless they have the right cannabis CPA organizing their books and structuring their entities.
Staying up to date on your accounting and finances is an excellent way to outdo the competition. Entities lacking organizational skills are at a financial disadvantage, which is why it’s always important to have your bookkeeping practices on point.
Need help managing your books? Contact us today to learn how your cannabusiness will benefit from our bookkeeping services.
Surround Yourself with the Right People
The right people will support your cannabusiness’s operations. Cannabis experts in various fields will understand what your business is capable of and advise you on sustaining and growing your operations while remaining compliant.
For example, the best cannabis CPA you can afford has the potential to enhance your business’s operations tremendously. This individual will offer value by saving time, energy, and capital that can be used to support the operation in other ways. Since each state’s regulations and taxes for cannabis differ, the right CPA will guide you, allowing you to avoid common errors you may overlook.
Experienced cannabis accountants and lawyers should be your operation’s first investments. Several other roles will guide your cannabis company’s decisions, including finance, marketing, valuation, and other areas. These team members and advisors will offer valuable insight when it’s most important, so it’s crucial to make hires you can trust.
As you look for a solid financial advisor, consider that individual’s long-term vision, as well as their background working with cannabis and planned strategy. What options have they considered? Is he or she only focusing on short-term results?
Advisors who think in the short term aren’t working for your long-term success. They want to work quickly without considering sustainable options that will support your long-term vision. Find people who plan to contribute to your vision and guide you in your decisions with expertise.
Have Cannabis SOPs in Place
We spoke about the importance of cannabis SOPs in the past. But communication and operational procedures are essential for success. Without a firm understanding of your processes, your business cannot operate effectively and efficiently.
Something as basic as purchasing procedures can be the glue holding your endeavor together. Accountability for important transitional tasks should be distributed among more than one person. This is possible through internal controls like signatures, dual-approval, and time logs for purchasing and cash handling.
Inefficiencies in your processes are a time suck, which is also a money drain. Don’t waste your time and money blowing through multiple bookkeepers without an effective system in place. Create SOPs for every aspect of your business where applicable.
Making Decisions for Your Cannabis Company
As you make decisions, know that they will impact your cannabis company’s success in one way or another. Acting, not acting, saying ‘yes,’ saying ‘no,’ it all directs the direction of your business. Simply put, it’s all in your hands.
By making the right choices and taking action, you’ll support your endeavor’s vision – and scale it to reach or even exceed your expectations. But keep in mind that the right team working with you should always be a priority.
Looking for the right team to support your cannabis company’s vision? Contact us today for expert guidance.
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
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 & 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.
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 & 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.
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.
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 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 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 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 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.”
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 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 FAQ
Here’s a list of answers to the most frequently asked questions we’re receiving from cannabis grow facility operators:
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.
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?
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?
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?
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?
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?
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.
Some of our clients have asked us, “Where can you get a cannabis business loan?” Or, “Where can you get a business loan for a dispensary?”
While it’s not always a loan for a dispensary, it’s pretty challenging for many cannabis business operators to find the funding they need.
Cannabis business funding, in general, is a touchy subject. Even as new states continue legalizing and decriminalizing cannabis for medical and adult-use, the financial sector is hesitant to work with these operations.
However, it’s important to note; there’s a lot of opportunity in the cannabis sector. Entrepreneurs and ganjapreneurs are ecstatic to get involved, and with proper financial backing, many achieve the success they’re chasing.
Traditional lenders aren’t going to help you get a loan for a cannabis dispensary. But we have several options for cannabis business loans worth looking into.
Keep reading to learn more about the options for funding a cannabis business.
Looking for a way to fund your cannabis business? Contact us today to learn more about how we can help you get a marijuana business loan.
How hard is it to qualify for a business loan?
Before applying for a cannabis business loan, it’s ideal to know what to expect. Simply put, sometimes, it’s pretty challenging to obtain cannabis business funding or loans.
Most of the traditional options for financing a small business aren’t available to cannabis business operators. This is primarily due to federal regulation, which makes funding a challenge for borrowers and lenders.
How can you qualify for a cannabis business loan?
For starters, one of the most typical questions we get asked is, “Can I qualify for a cannabis business loan if I have bad credit?” The answer surprises most people.
Cannabis businesses can get approved for funding with invoice financing. Business Cash Advance is also an option for those with poor credit. However, other options exist.
Asset-Based Financing, while more difficult to get with poor credit, could be an option. But you’ll have to speak with the lender directly to determine whether this will work for you.
Invoice financing is usually one of the best options because it doesn’t account for business credit. If your business invoices customers regularly, this could work for you.
Business Cash Advance is also appealing because it accepts bad credit. However, your terms will depend on your personal credit. With this in mind, it’s crucial to determine which option will work best for you per your credit.
Some people wonder, “Can I get cannabis business loans if I’m a startup? This is doubtful. Your business should have a record of sales or receivables and, if it’s a startup, it likely has neither.
Even with prior company ownership experience, funding for marijuana or cannabis business isn’t accessible without data from its operations. Thus, if you’re running a cannabis startup, it’s ideal to find alternative options and funding solutions to acquire the capital you seek.
Can cannabis businesses borrow through a bank or other commercial lender?
The option to go with a commercial lender to finance your cannabis business is available. But since this option is quite new to the industry, it could be challenging to find one.
With our experience handling the financial aspects of cannabis operations, we know where to find commercial cannabis lenders. Our connections in this industry have made us a resource to marijuana business operators looking for funding to fuel their growth.
Have a cannabis business that needs capital? Contact us today to learn more about how we can obtain a marijuana business loan.
Cannabis Business & Dispensary Loan Types
Private Loans for Cannabis Businesses
Private loans for marijuana companies come from non-bank lenders. The rates commonly range from 8 to 25 percent, with lending terms spanning from one to three years. The funds are usually available within seven to fourteen days. These lenders offer business funding to growers and manufacturers of cannabis products as opposed to dispensaries. However, if the dispensary has proven revenue, this could be an option. Venture capital firms are the go-to for private loans.
Real Estate Loans for Marijuana Companies
For cannabis CEOs interested in buying land to cultivate cannabis or real estate to operate the business, a real estate loan could be a solid option. Hard money loans, bridge loans, and shorter-term mortgages are generally available for cannabis businesses and medical marijuana dispensaries. The interest rates usually range from 8 to 20 percent, with terms ranging from 1 to five years. Funding takes between 30 and 60 days following the application.
Common Cannabis Business Loan Questions
What type of information is needed to apply for a cannabis business loan?
Even though cannabis lenders are operating in a non-traditional sector, they still operate the same way as other lenders. This means you’ll need to have your finances in order when the time comes to apply for your loan.
Lenders will want to look over your financial records, which should include income statements, balance sheets, and bank statements. They’ll also want to analyze your credit risk profile and capital needs. In some cases, you might find lenders catering to the cannabis industry interested in looking over your key management staff and active cannabis licenses you’re holding.
Are monthly inventory and/or cash audits necessary?
While this is something we recommend all of our clients have done, traditional financial institutions will demand monthly inventory and cash audits throughout your loan’s life. This is especially true for the institutions that administer loans for the Small Business Association (SBA). While cannabis-specific lenders might not demand these monthly audits with timely payments, it’s still best practice to keep up with your monthly inventory and cash audits.
How much money can I borrow for my cannabis company?
Just as with other loans, the credit limit for cannabis businesses depends on a few variables. These include your capital needs, credit risk profile, balance sheets, income statements, bank statements, management personnel, credit score, and others. The size of a cannabis loan is contingent on what kind of loan you pursue, as well as the reason you need 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.
Now that the January 31, 2021 deadline for the medical Annual Financial Statement reports (AFS) has passed, we have some additional insight for cannabis business operators in Michigan. The requirement per the AFS’s section 701 of the Medical Marihuana Facilities Licensing Act (MMFLA) has made our jobs more challenging but certainly not impossible.
Even as many licensees missed the deadline, the MRA has continued to accept reports without officially granting extensions. As such, while we believe the MRA understands the challenges, we doubt the grace period will extend for another year.
So far, many licensees have received notices regarding their adult-use licenses. They’ve been told that they will need an AFS by June 30, 2021. As the deadline for these filings grows nearer, we’re listing some of the most common deficiencies we’ve observed from the MRA that demand more clarification and/or action below.
Need assistance with your Annual Financial Statement? Contact us today to learn more about how we can help.
What is the Annual Financial Statement (AFS)?
As outlined in the AFS’s section 701, the MMFLA now requires licensees to submit to the Marijuana Regulatory Agency (MRA) financial statements outlining the licensee’s entire operations per the manner and form outlined by the MRA.
The MRA has developed its annual financial statement form report that licensees must use. The agency will not accept any other report formats. Furthermore, the Annual Financial Statement (AFS) Contact Authorization form will need to be submitted with the AFS.
Here are some links to additional essential resources for filing the Annual Financial Statement in Michigan:
Who Can Prepare the Annual Financial Statement (AFS) Report?
The AFS report must be conducted by an independent certified public accountant (CPA) licensed in Michigan. But does this CPA need to be located in Michigan to prepare the AFS report?
Can an out-of-state CPA firm registered in Michigan prepare the Annual Financial Statement report? Yes, as long as the CPA is licensed in the State of Michigan.
For CPA firms registered in Michigan, the individual CPA handling your report must be licensed in the state. If the CPA is not licensed in Michigan, this person cannot prepare the report on your behalf. This information is under Section 701 of the Medical Marijuana Facilities Licensing Act and MCL 339.722.
Requirements for the Annual Financial Statement (AFS)
Reporting periods and annual requirements are announced by bulletin like the one found here. The bulletin was issued on June 3, 2020, which announced that the Annual Financial Statements requirements for all businesses and individuals with marijuana licenses on or before December 31, 2019 include the following:
Licenses obtained prior to October 1, 2019 must deport by October 31, 2020. However, the initial licenses acquired from October 1, 2019 to December 31, 2019 should report by January 31, 2021.
Any marijuana licensee who has acquired a license on or before December 31, 2019 needs to file their report for 2020. This report should include information regarding all licenses held at any point during the applicable reporting period.
The report outlines an agreed-upon procedures engagement that has to be handled by an independent certified public accountant (CPA).
CPAs have to communicate all findings using the report structure created and implemented by the MRA designed explicitly for the marijuana industry. License holders are responsible for filing these reports with the MRA – the agency will not accept other reports.
Without compliance with these reporting requirements, licensees operating in the State of Michigan could be opening themselves up to liability. Filing a late report forwards licensee names to the MRA Enforcement Division, which could result in disciplinary action, such as potential license suspension.
Need assistance with your Annual Financial Statement? Contact us today to have a CPA handle your AFS for you.
Common Annual Financial Statement Deficiencies from the MRA
Preparing a Michigan AFS per the MRA’s demands can be challenging. Here’s a list of the most common deficiencies to consider:
Entities structured with multiple licensees and a centralized corporate management function don’t clearly outline their allocation of expenses with each corresponding license tested.
Payroll found in the general ledger isn’t reconciled with payroll tax returns.
Transactions don’t include properly-maintained supporting documentation.
Customers and vendors recorded in the general ledger don’t use the legal entity names.
Revenue found in the general ledger was not reconciled with the POS or METRC.
Individual sales transactions from METRC do not align with the underlying support observed in the general ledger.
Ownership tables are not aligned with the documents offered to the MRA.
Lease agreements are matching the information offered to the MRA.
Initial licensure dates offered were not accurate, which impacted the reporting periods.
Tips to Prepare for Michigan Marijuana Regulatory Agency Financial Report
As we prepare for the next round of adult-use AFS reports, it’s essential to prepare cannabis companies for the testing. This will involve reviewing and reconciling 2020 record keeping.
Here are some tips to ensure you’re prepared for this testing:
Properly identify your ownership structure and make sure it agrees to all underlying agreements on file with the MRA.
Maintain the right documentation for your license approval dates.
Perform wage reconciliation of the 941s to the general ledger quarterly.
Check all of the supporting documentation for revenue and expense transactions to ensure they’re all properly maintained. Include this as a component of your accounting process and controls.
Get form W-9 for every vendor and check the information recorded in the general ledger to ensure it includes the full legal entity name vendor. Maintain caregiver numbers and license numbers for all vendors where applicable.
Reconcile sales to METRC and, if applicable, to the POS, each month. Make sure to document reasons for any discrepancies.
Check all agreements to ensure they’re appropriately executed by all parties and are documented with the MRA. For revisions, regardless of whether written or verbal, must be documented.
Check all legal documents, including but not limited to licensing agreements, leases, and other agreements, to ensure they’re all readily available with all transactions in the general ledger properly recorded in accordance with the agreements.
Need an expert CPA to handle your Annual Financial Statement? Contact us today to learn more about how we can help.