Cannabis Business Financing: How to Fund Your Operation

With the state of the cannabis sector, traditional banking services, including but not limited to financial services, aren’t easily accessible. Federal prohibition and restrictions on lenders make it a challenge to get entrepreneurs the capital they need to scale their businesses.

Whether you’re looking for a loan for a dispensary, cannabis cultivation, or something else, we’re covering the options now.

Qualifying for Marijuana or Hemp Business Loans & Financing

To start, you’ll need to understand that the traditional lenders aren’t always giving business loans to CBD companies. Nor are they dishing out business loans for dispensaries. However, you have some options, and you might even qualify if your credit is mediocre.

These are the most common cannabis business loans you’ll find:

Private Loans for Hemp or Marijuana Businesses

Non-bank lenders can offer private loans for CBD companies, marijuana businesses, and cannabis ancillary operations. These come with rates ranking from eight to 25 percent. Lending terms go from one to three years. You’ll have the funds in one to two weeks. This is a business loan cannabis growers and product manufacturers prefer to use. But dispensaries might use this option if they have proven revenue. Check with venture capital firms for private loan availability.

Real Estate Loans for Cannabis Ventures

Thinking about purchasing land for cannabis cultivation? Or perhaps you need a place to set up shop. Real estate loans for cannabis ventures are pretty common. You might have access to bridge loans, money loans, and shorter-term mortgages if you operate a cannabis business or medical marijuana dispensary. Interest rates are commonly eight to 20 percent. The terms usually go from one to five years. You should have access to funding some time between 30 and 60 days after you apply.

Invoice Financing for Cannabis

Many cannabis business operators use invoice financing to maintain cash flow. The cash flow lag commonly plaguing this industry is easily avoidable with this type of cannabis financing available.

This is a great option for cannabis cultivators, distributors, manufacturers, brands, and ancillary operations that invoice customers. Invoice financing enhances business flexibility while keeping cash flow consistent.

Invoice financing accrues interest when you use the funds. You can borrow against invoices for up to 90 days, and you’ll accumulate fees ranging from 2.5 to 3.5 percent of the invoice value. Your fees are then assessed once every 30 days.

Inventory Financing for CBD, Hemp, and Marijuana Companies

If your operation has inventory, you can probably use inventory financing to your advantage. This is when you balance your cash flow with funding you can utilize for more inventory or other costs.

Your lender pays the vendors. You’ll then have cash-on-delivery pricing available. In turn, his form of financial management will save money and facilitate your business’s growth.

This method of cannabis financing is becoming increasingly common among cannabis distributors, dispensaries, cultivators, and ancillary companies. Flexible financing promotes relationships and discounts within the industry, and this supports scaling.

The inventory financing model lets you borrow funds for up to 90 days. You then pay 2.5 to 3.5 percent of your invoice amount, which is assessed every 30 days.

Equipment Leasing for Hemp Businesses

Paying for equipment up front isn’t always an option. By leasing the equipment instead of buying it outright, cash on hand increases. These lease interest rates range from eight to 20 percent, and the terms are usually one to seven years. But this ensures equipment availability in five days to two weeks, making it an excellent option.

Cash Advances for CBD Companies & Dispensaries

Dispensaries, in particular, find cash advances beneficial. This is because they can usually prove revenue. Factor rates are typically 1.30 to 1.49. And the terms are commonly 4 to 12 months. Since the funding comes quick (one or two days), this is a viable option for operations looking to get cash quick for short-term. However, it’s important to keep in mind that this is a pricey option, so it’s ideal to check the viability of other capital sources first.

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