It can be difficult to obtain a loan for your cannabis business. The industry is still relatively new and because of the legal landscape, many banks and traditional lenders are hesitant to work with cannabis companies. However, there are some options available for those looking to finance their cannabis business. In this article, we’ll explore a few ways to get funding for your cannabis company.
The cannabis industry is growing rapidly as more and more states legalize the use of marijuana. This presents a unique opportunity for entrepreneurs who are looking to start their own business in this burgeoning industry.
Cannabis business loans may be difficult to obtain, but there are some options available for those looking to finance their cannabis business. With a little bit of research and planning, you can find the right loan for your company
There are a few options available for those looking to finance their cannabis business. One is to take out a personal loan. This can be a risky proposition, as you will be putting your personal assets up as
How to qualify for a cannabis business loan
First, you have to present your marijuana business model to a lender. Like any other business, you will need to show the lender that you have all the bases covered. Go over all variables of where your business plan can go and how you are prepared to pivot regardless of what challenges you may face. Include a detailed plan on how you will repay the loan. Be prepared to present everything you’ll need for the cannabis business, including rental space, permits, licensing, supplies, employees, processing equipment, and marketing budget. To qualify for a cannabis business loan, be prepared to:
- Show that you have a solid business plan with achievable goals.
- Demonstrate that your company is compliant with state and local regulations.
- Prove that you have the support of your community.
- Have a solid financial plan in place.
What’s new for 2022 in cannabis funding?
As the cannabis industry grows, more and more entrepreneurs are looking to get into the business. But one of the biggest challenges faced by these entrepreneurs is how to finance their business.
The most popular option is to seek funding from venture capitalists or angel investors. However, this can be difficult, as most traditional sources of funding are not willing to invest in an illegal industry.
A third option is to look for loans from cannabis-specific lenders. These lenders understand the risks involved in financing a cannabis business and are often more willing to make loans than traditional banks.
Traditional Banks Do Not Yet Offer Loans to Cannabis Businesses
One of the biggest challenges faced by these entrepreneurs is how to finance their business. Many traditional sources of funding, such as banks, are not an option for cannabis businesses due to the illegal status of the industry at the federal level.
Cannabis companies often have a difficult, or impossible, time securing loans from banks. This is because the cannabis industry is illegal under federal law. Federally Insured banks and other financial institutions must comply with federal regulations, which make the process of lending to an illegal business risky and complicated.
The Federal Deposit Insurance Corporation will not insure most banks that engage in this activity. Banks also may be reluctant to lend to a cannabis business because this activity could be considered aiding and abetting a federal crime.
Why Can’t a Cannabis Company Get a Loan from a Bank
Cannabis companies cannot get a loan from a bank due to certain laws passed decades ago. One is the Controlled Substances Act that made “marihuana” a crime under federal law. Later, the Anti-money laundering and Bank Secrecy Act (AML/BSA) made it a crime to deposit any funds generated from trafficking in illegal controlled substances money launder.
Additionally, FDIC and OCC regulators do not want to allow banks to lend to cannabis companies. Finally, some banks have taken the risk. The Treasury Department issues quarterly reports on these banks from its Financial Crimes Enforcement Network (FinCEN).
Where can you find a loan for your cannabis company?
There are a few places where a cannabis company can find a loan. One option is to look for an alternative lender that specializes in the cannabis industry. These private equity lenders may be more willing to work with cannabis businesses since they understand the unique challenges of the industry.
Another option is to seek out private investors by selling shares in the company that has the cannabis license. These private equity lenders may be more willing to take on the risk of investing in a cannabis business because they are not subject to the same regulations as banks.
Also, some states like Illinois and New York have set up programs to provide loans or other financial assistance to social equity cannabis businesses. These programs may be able to help companies that are having difficulty securing financing from traditional sources.
How else can a cannabis company access funding?
Cannabis companies can also seek out venture capital firms that invest in high-growth businesses. These firms may be more willing to take on the risk of investing in a cannabis business. Be advised that private equity firms are often looking for businesses with the potential for high returns.
A cannabis company may be able to raise money from friends, family, and other individuals who believe in the business. Finally, some cannabis companies have been able to secure loans from state-regulated financial institutions. These institutions are often more willing to work with cannabis businesses than traditional banks.
Key Points on how to get a Loan for Your Cannabis Company
- Traditional banks do not offer loans to cannabis businesses due to the risk and complications associated with the industry.
- Private equity lenders may be more willing to work with cannabis businesses, as they understand the unique challenges of the industry.
- Some states have set up programs to provide loans or other financial assistance to cannabis businesses.
- Cannabis companies can also seek out venture capital firms that invest in high-growth businesses.
- Friends, family, and other individuals who believe in the business may be willing to invest in the company.
- State-regulated financial institutions are often more willing to work with cannabis businesses than traditional banks.
Private Equity Cannabis Business Loans.
One way to get funding for your cannabis business is through private investors. There are a number of firms that specialize in investing in the cannabis industry. These firms can provide the capital you need to get your business off the ground. Private investors may require a higher return on their investment than a bank or traditional lender, so be sure to factor that into your business plan.
Can a cannabis company get an SBA Loan?
Another option for funding your cannabis business is through government grants. The Small Business Administration (SBA) offers a number of programs that can help you get the financing you need. Unfortunately, cannabis companies do not currently qualify for SBA loans. Some of the bills in Congress to legalize marijuana address this and will be making SBA loans available once cannabis is legal nationwide.
What are some alternatives to cannabis business loans?
Crowdfunding is one alternative to cannabis business loans. Many states allow for crowdfunding, even for those people that are not accredited investors. In Illinois, you can go to an online webportal at https://illinoiscannabisfunding.com/ and list your cannabis company’s offering for funds.
What about cannabis business grants?
The US government does not currently offer any grants specifically for cannabis businesses. However, there are some private foundations that offer grants for businesses in the cannabis industry. You can search online or contact your local Chamber of Commerce to find out if there are any grant opportunities available in your area.
Also, check your state’s cannabis regulator’s websites for any potential cannabis business grants. For example in California, there is a Cannabis Equity Grants Program that is open to social equity applicants to reduce the barriers to entry into the legal, regulated markets.
Bottom line on where you can find a cannabis business loan?
If you are looking to start a cannabis business, you will need to find the right financing. There are many options available for cannabis business loans. Talk to a lender about your business plan and be prepared to present all the necessary information. With the right loan, you can get your cannabis business up and running quickly and efficiently. We have a network of lenders that our office has worked with before. Contact us today to help get your cannabis business loan and fund your new business.