Cannabis Business Financing: How to Fund Your Operation

Rohan Mathew

Updated on:

Business financing is one of the most challenging things to obtain in the cannabis sector. There’s indeed much speculation about being compliant, but many company leaders in the cannabis industry need solutions.

Funding a cannabis operation can be a difficult but feasible hurdle to overcome. Whether you are a prospective manufacturer learning to grow legal cannabis at a commercial scale, a distribution specialist, or other important role in the production and sale of cannabis-based products, obtaining the needed amount of funding at the right time can be a crucial step in establishing a company to last the long haul. If you have questions about cannabis business financing or looking for a loan for a pharmacy, cannabis manufacturing, or something else, you’ll find the answers in this article.

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But what about traditional banking? Will a bank offer cannabis company financing?

Some banks might. But federally influenced banks are unwilling to lend money for the cannabis business. However, there’s much cash in the industry, even if it’s not being placed in the hands of cannabis entrepreneurs.

Most banks won’t give loans to businesses that deal with cannabis because it’s still illegal at the federal level. Cannabis business financing can help you get your foot in the door and start transforming those big dreams into a reality.

Keep these methods for obtaining cannabis business loans in mind as you raise capital.

Invoice Financing for the Cannabis Sector

Cannabis businesses often use invoice financing to manage their cash flow. Invoice financing is perfect for cannabis growers, retailers, dealers, brands, and suppliers who invoice consumers. 

This financing method enhances business flexibility while ensuring your cash on hand is as consistent as possible. It accrues interest when you borrow against invoices for up to 90 days at rates between 2% – 3%. Fees are assessed once every 30 days.

Private Loans for Marijuana or Hemp Businesses

Non-bank lenders offer private loans that CBD companies, marijuana businesses, or ancillary operations. 

The cannabis business is booming and only getting better with time. Still, not all dispensaries are ready to take on private loans right now. They need proven revenue before they can start borrowing money from non-bank lenders at rates ranging between 8 and 25 percent interest for one to three-year terms! 

Be sure to check with your preferred venture capital firm to discover whether a private loan is available for your business. In some cases, private loans might not be an option.

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Equipment Leasing for Cannabis Business

What if you need equipment and don’t have the upfront cash to pay for it? Or perhaps you have the money to buy the equipment you need, but you know it could be better allocated elsewhere to enhance your business’s operations?

This is a situation many business operators find themselves pondering. However, equipment leasing is becoming more and more popular in this sector.

It’s always nice to know that other options are available besides buying everything upfront—especially given how expensive some items can be these days. With leasing on average interest rates ranging from 8-20%, with terms usually in between one to seven years, you’ll never get stuck. This, though, guarantees the supply of facilities within 5 to 14 days. They’re already expecting people like us who will end up renting!

Inventory Financing for CBD, Hemp, and Marijuana Products

How do you balance your cash flow with funding you can utilize for more inventory or other costs? You can use inventory financing to your advantage. 

This method of cannabis financing will let you borrow funds for up to 90 days. This could help provide a solution as it only requires 2-3% of an invoice amount per 30 days. However, be mindful of what you borrow. The rate may not seem like much at first glance, but this amounts to quite a lot over time!

Real Estate Loans for Cannabis Firms

Are you planning to purchase land to set up a shop or to cultivate cannabis? Real estate cannabis loans are pretty common for these types.

Perhaps you own a cannabis company or medicinal cannabis supplies. In that case, you might have exposure to bridge loans, insured, and shortened mortgage.

Interest rates typically vary between 8 and 20%, and terms usually range from 1 to 5 years. You’ll get the funding within 30 to 60 days of applying.

Cash Advances for CBD Brands & Dispensaries

Cash advances are an excellent way for cannabis dispensaries to generate more revenue. They come with short-term financing terms, but the business will be paying at high-interest rates. 

They help generate more revenue, with short-term financing terms of 4 to 12 months and 1.30 -1.49 factor rates on the dollar amount funded.