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While there has been a steady growth in the number of cannabis businesses, they are facing limited funding options. Branching out, or opening new retail chains has become difficult and finding capital for smaller businesses is almost impossible. This is mainly because cannabis is still illegal under federal law. Moreover, bigger banks and investors do not want to be linked to the cannabis industry for many reasons. Along with that, there has been a growth in the number of fake or con companies posing as investors who want to fund a cannabis business.
If you are planning to start a cannabis project and are looking for funds to finance cannabis equipment, real estate and construction, this post will guide you through all of it.
The Black Market is Not the Answer
Federal law and the fear of costly settlements have a tendency to force entrepreneurs towards the black market. But the black market is not the answer to fix problems when it comes to cannabis financing. The black market can lead to more problems than expected. While there are limited options to finance a cannabis project, they are all legal and safer than turning towards the black market.
Where to Find Funding for Cannabis Project?
Sourcing money for any business is a difficult task. Considering that, cannabis financing is extremely difficult to get through. While there are financial institutions who are opening up their doors to invest and finance cannabis projects, getting credit cannabis financing rarely exists in the marijuana market. The first or seed investment for a cannabis project will more often than not be money that you have saved, or funds from family and friends. Yes, it does limit your venture but since there are very few and selective traditional financing options for a cannabis project, it will cost you a little bit of money before your business debut. If you want to get investors to finance your cannabis project, it is vital to make the most out of your seed round or initial investment.
After the launch of your cannabis project, the success will magnetize professional as well as third party investors towards your project. From there you can build your cannabis project. This also means that if your second series of funding gains a good profit, you will be able to branch out into the real estate and cannabis equipment funding too. Some cannabis financing alternatives include collaborating with sports stars, celebrities, individuals with a very high net worth who are willing to venture into the cannabis industry, and angel investors to name a few. If you are looking for established firms who help in cannabis financing, we can help connect you to our many partners who are not afraid to lend in the cannabis space. One thing to keep in mind is that while friends and family will expect common stock as payment of the money they invest into your cannabis business, professionals will always want more than that. They will look for additional benefits, which may include an interest in your company, personal real estate, and other investments to name a few.
Real Estate Funding for Cannabis Projects
If your launch has been a great success and you’re planning to widen your venture, real estate is the second most important acquisition in the line up. But attaining real estate for a cannabis project is very difficult. While there are many established firms that claim to not be involved in cannabis real estate proceedings, you might see them making a few exceptions. The best way to getting real estate cannabis financing is to look for private finances. Many cannabis entrepreneurs have a hard time getting through a loan for their cannabis project. This is because chartered banks and credit unions cannot involve themselves with marijuana business under federal laws. If you want to construct or buy a warehouse, retail store, kitchen, growing land or a research lab for cannabis products, getting real estate financing is vital. Some of the key things to keep in mind are as follows:
– Ensure that the property you are looking at can be accepted for a cannabis commercial loan or credit. You cannot look at property in states where marijuana is illegal. The property has to be in the legalized states.
-The cannabis commercial loan can be up to around $10 million. This will make it easier for you to get hold of a qualifying property for your cannabis project. Note that each type of property will have different legalities and different licenses.
While it does look like a big task, know that it is always better to be legal than to do things illegally. It can land you into a lot of trouble and will cost you a fortune.
Cannabis Equipment Financing
Cannabis equipment financing can be as difficult as getting a cannabis real estate fund. But, it is not impossible. There are many legitimate establishments that are open to cannabis equipment financing. If you’re planning to venture into the cannabis growing and cultivation industry, you will need cannabis equipment funds to help you get all the supplies you require for cultivation and maintenance. Chartered banks and unions are not yet allowed by federal law to allow loans for cannabis equipment needs. But there are many well established investors and equipment finance companies who run legal businesses and are ready to fund a cannabis equipment loan. With that said, many cannabis equipment manufacturers also lend their products on loans to cannabis companies. You can try getting the manufacturer to give you the equipment in return of a part of the profit.
The financing rates vary depending on equipment, quantity, the company’s time in business and credit history. The scale varies from 6-30% on time periods of twelve to sixty months. This scale will vary if you want to lease equipment for cannabis growth and cultivation. Equipment leasing for dispensaries also have a different price percentage. The cannabis industry is one that is booming and increasing at a quick pace. As laws around cannabis change, it is likely that the industry will be fully legal soon. As more and more states are legalizing the use of cannabis, you will be able to reap big profits from the industry.
Cannabis is not only used as a recreational drug, but is also known for its medicinal values. There a lot of patients across states who live on prescribed cannabis medications. Therefore, venturing into the medical side of cannabis is a good option for budding entrepreneurs.