The Cannabis Industry Is Already Recognized by Big Lenders
The cannabis industry may be the next big thing in the world of business. It's an innovative business venture, despite the product being frowned upon for its psychoactive properties. The existence of weed business loans attests to this progression of the industry from one that the law discriminated against to a lucrative investment opportunity.
Only a few lenders are willing to finance the cannabis business. Plus, there's a lot of legal red tape you have to navigate. This article has some examples of where you can start looking to get the financing you need and learn more about cannabis laws.
Examples of cannabis Equipment
Cannabis equipment is a necessary but expensive part of the business. Most business owners may consider loans to buy, lease, or finance cannabis equipment. The type of loan you choose depends on:
- Whether you want to get new or used equipment
- If you're buying or leasing it
- The state of your business and personal credit score
Some examples of cannabis equipment you can get a loan for include HVAC units, CO2 extractors, grow lamps, and more. Once you know the kind of tools you want, you can consider financing options.
Traditional lenders aren’t an option, but there are other lenders you can consider. Even with bad credit or a business that hasn't been around for long, some companies offer the best equipment financing for bad credit score individuals.
Financing Options For cannabis Equipment
Whether you're looking for startup funding, equipment financing, or money for operational costs, there are lenders you can approach who specialize in funding the cannabis business. The available options are debt and equity financing from the following:
An alternative lender offers unique business loans and financing beyond what most lenders provide. The funds don't come from mainstream providers like banks, so eligibility requirements are less stringent.
Through alternative lending, you can get the capital you need for your cannabis business. If you're already running your business, you can still get equipment loans through alternative lending. That way you'll get the equipment to upgrade to better cannabis farming practices so your business can succeed.
So, what do alternative lenders consider when you apply for funding? The few things required include:
- Credit Score
The 650 range is ideal, but if yours isn’t quite there, you may still qualify for financing programs.
- How Long Your Business Has Been Running
Most lenders prefer an established business that's been around for at least two years, but alternative lenders can fund yours even if it's only been running for six months.
- Minimum Sales
To ensure that you can pay back your debt, lenders will need to know if you make enough sales to be profitable. The exact figure they look for varies with each lender, but it's usually lower than what most traditional ones require.
Venture Capital Firms
Most venture capital companies limit their investments to startups focusing on technology, biotechnology, and clean technology. Still, some firms specialize in cannabis investments.
Since Venture Capitalist funding is a form of equity financing, you'll need to give shares of your company in return for their investment. They'll need assurance of getting a substantial return on investment (ROI) for them to invest. Other things they consider include:
- Whether your business has been in operation for at least six months
- Incorporation as an LLC, limited company, or S corporation
- A personal credit score of at least 500
- Gross monthly sales of at least $10,000
The cannabis industry has lots of room for change and development. Many companies focus on improving cannabis farming practices and helping small businesses grow in this industry.
A lot of these companies focus on the development and use of advanced equipment to improve cannabis yields. Such equipment financing companies help to improve the profitability of the cannabis industry.
Rules Affecting Cannabis Business Financing
Since it's not federally legal everywhere, the cannabis business can be quite restrictive, making it an unattractive business venture for most investors. One prime example is the Federal Controlled Substances Act which restricts the farming, possession, and use of cannabis.
However, some rules ease the prejudice against cannabis, so more people are starting to look at it as a viable investment. The discovery and legalization of cannabis for some medical uses is one example of this.
The cannabis industry is on the rise, and a lot of big lenders realize this and use it to their advantage. For a lot of cannabis business owners, financing is key to getting enough funds to buy or lease quality equipment that improves the quantity and quality of their yield. As the world discovers more benefits of cannabis to outweigh its bad reputation, you may see an increase in financing options available for the industry.