While more and more cannabis businesses are being recognized as legitimate operations, the path to financing in this industry is still a bit murky. Cannabis remains a Schedule I controlled substance on a federal level, so even if it’s legal in your state, you won’t be able to get a cannabis business loan from a major bank or similar financial institution. That, however, doesn’t mean you’re out of luck.
Here are answers to some commonly asked questions about securing a loan as a cannabis business owner.
What is a cannabis loan? Cannabis loans are available to finance dispensaries, farming and growing facilities, cannabis product manufacturing facilities and other properties related to the marijuana industry. They may be business startup loans or provide funds for equipment or operational finances.
Can I get a cannabis business loan? Yes — and no. Because of what’s noted above regarding the legality of cannabis businesses from a federal perspective, federally chartered banks, credit unions and traditional lenders generally can’t offer cannabis business loans. However, a variety of alternative lenders are active in this up-and-coming industry.
Which cannabis business loan is right for me? You will have to decide which type of cannabis business loan fits your needs, perhaps considering these six most common types: recreational dispensary, medical dispensary, grow option, manufacturing facility, equipment loans and leasing, and business loans. That last option might be for non-real estate purposes such as inventory, marketing, payroll and business expansion.
Who offers cannabis business loans? Many hard money lenders and other alternative lenders offer cannabis business loans. You may also consider approaching a venture capital (VC) firm if you don’t want to take on debt, but that equity financing means you are selling part of your business to the VC firm. You can find plenty of information online about your options so you can decide which one is right for you.
How do I get a cannabis business loan? Once you have found a lender that interests you and completed your due diligence, you will be going through an application process so the lender can be sure you will be able to meet your payback obligations.
The Takeaway
As the owner of a cannabis business, you have fewer options for financing than more traditional businesses do because major banks and similar financial institutions can’t offer loans for this burgeoning industry. However, there are plenty of alternative lenders that will work with you to provide the financing your cannabis business needs to get off the ground, maintain operations or expand.
If you have any questions about how your cannabis business can secure financing, give Clear Skies Capital a call at 800-230-9822. We can provide insight into how we have helped other owners in this industry find the loan they were looking for.