For many smaller businesses within the cannabis industry, equipment remains a costly barrier to improvement. Fortunately, cannabis equipment lenders can help companies achieve their equipment needs at a loan amount that works best for them. When comparing equipment lenders, have a general idea about the total loan amount that you intend to ask for. While examining lenders, keep in mind that cannabis regulations tend to vary by state. Loans frequently offer different rates, loan amounts, and payment schedules so take your time comparing the options while researching the rules and regulations specific to your area.
Best Cannabis Equipment Lenders
Cannabis equipment lenders have the power to help bring a small or growing cannabis business into the next phase. Equipment improvements allow a company to become more efficient while also increasing productivity and profits. When examining the different equipment lenders, have a rough loan amount in mind and understand which rates and fees would likely work best for the company.
GUD Capital
GUD Capital provides multiple equipment financing options such as equipment leasing, equipment loans, and equipment sale-leasebacks. An equipment sale-leaseback occurs when a business sells the equipment to the company or firm and then that company or firm leases the equipment back to your business. One of the main purposes of a sale-leaseback is that it promotes cash flow.
The credit scores and rates often differ for equipment loans provided by GUD Capital. The rates frequently range between 5% and 15% in general. Equipment financing terms span 1 and 25 years which provides an added level of flexibility for small businesses. Funding has the potential to take up to 90 days so it’s recommended to begin the application earlier rather than later if you have a relatively close deadline. Loan repayments can be made on a monthly or weekly basis. Keep in mind that these loans typically require documents from individuals such as personal tax returns and business tax returns during the application process. The specific details of the loans often differ in terms of fees and rates.
Dynamic Alternative Finance
Dynamic Alternative Finance specializes in offering equipment lending opportunities such as Capital Equipment Leasing to individuals in various areas of the cannabis industry. The company provides two funding options in terms of equipment leases that are called Equipment Lease to Own and Capital Lease Transaction. The Equipment Lease to Own option provides loans ranging between $100,000 and $1,000,000. The lease extends for 2 years and requires up to a 50% down payment while generally covering 70% of the hard equipment’s cost. A hard cost usually refers to direct expenses. The second funding option called the Capital Lease Transaction usually provides loans between $750,000 and $50,000,000. The leases often span over 4 years and require 30% as a downpayment. The specific credit score required to use such loan options tends to vary depending on outstanding factors. Additional fees and detailed interest rates are not clearly stated.
GoKapital
GoKapital is located in Florida and offers cannabis-specific loans as well as equipment financing options. The company offers Quick Business Loans that support people within the cannabis industry by offering loans ranging from $50,000 to $5,000,000. A minimum credit score of 500 is required for the loan as well as annual sales exceeding $150,000.
In terms of equipment loans, the lender offers self-secured loans for new or old equipment. The loans provided by the business equipment lender are able to span between $30,000 and $5,000,000. Loan terms are able to extend up to 5 years. It can take up to 5 days to fully fund the loan after approval. The website provides an interactive equipment financing calculator where interested individuals have the ability to get a better grasp on their likely funding options. The application process will ask for information such as the reasoning behind the loan amount and the business’s information.
However, the fees might accumulate with interest rates that extend up to 35% for equipment loans. The rules about the cannabis industry can impact the specifics of a generally provided equipment loan.
United Capital Source
United Capital Source provides a wide range of assistance for companies within the cannabis industry. The company has unsecured small business loans that have expedited funding and relatively fast approval times. The industry-specific loan can be used to fund a wide range of needs such as equipment, advertisement, expansion, and staff. The loans do not have application fees, account closing fees, or early payment fees.
Exact equipment loan details on the marijuana-related industry page were unclear, but United Capital Source provided information on their equipment loan page. Remember that the information and rates for a cannabis-related loan will probably differ from the more general equipment loan due to the regulations surrounding the cannabis industry. Interested individuals are encouraged to interact with the small business loan identifier designed with marijuana dispensaries in mind.
According to the information on the equipment loan page, individuals must have a credit score above 600. The interest rates and loan terms can depend on the loan amount. Typically, the exact terms associated with the equipment financing loan will depend on a business’s specific situation. Interested individuals have the ability to apply online or consult with a loan expert.
Small Business Funding
Small Business Funding offers a more flexible loan to individuals within the cannabis industry. The loan has the ability to be used for cannabis equipment or purchasing inventory. Loans provided by Small Business Funding often range between $3,000 and $500,000. The application process can take less than a day and funding is typically received within 3 days. The company mentions that it has options for people with bad credit as well as individuals in need of expedited loans. However, the exact minimum credit score and interest rates are unclear. One reason for the unclear credit score explanation stems from the understanding that the company tends to place a higher level of focus on a business’s performance than on an individual’s credit score. Small Business Funding stipulates that to receive a loan, businesses must have been functioning for at least 6 months and have a monthly income above $15,000. The lender also requests documentation such as an application and recent statements from your bank.
Benefits of a Cannabis Equipment Loan
Equipment can be expensive but the benefits of obtaining newer or more efficient tools often offset the initial costs. Using a cannabis equipment loan gives businesses several benefits such as the luxury to protect actual cash flow and gain flexible funds.
Cash Flow: Equipment loans allow a business to protect actual cash obtained by the business. Preserving cash flow lets businesses save for other fees and lock in loan rates that have the ability to ease the payment process on large pieces of equipment by more effectively spreading out the substantial costs over a longer amount of time.
Saving Money: Yes, cash flow improves, but you also save money on rentals that you may have used for some time. Instead of throwing money away on rented equipment, you can own that equipment and make a much more reasonable loan payment.
Flexible Use: The equipment loans can be used to obtain a wide range of tools. Some lenders allow individuals to obtain multiple pieces of equipment with one loan. Speak with a lender to have a better understanding of a specific equipment loan.
Covered in an Emergency: Equipment loans help companies more easily react to unforeseen emergencies. The loans often allow businesses the ability to quickly replace old or faulty equipment. Broken equipment has the potential to slow down or even completely halt a business which means that replacing equipment can require swift action to keep a small business open.
Tax Perks: Typically, equipment loans have tax perks. For example, it’s common for individuals to be able to deduct the interest made on the payments. However, keep in mind that the specific rules and regulations surrounding the cannabis industry have the potential to differ. Consider speaking with both an industry and tax professional to have a clear understanding of the laws.
Convenience: Obtaining a cannabis equipment loan frequently offers people the convenience of access. For example, it’s common for many lenders to allow individuals to apply online. Many applications take less than 24 hours to complete. Online applications are frequently paired with strong customer support systems such as customer representatives available to speak with individuals on the phone as well as customer support email addresses for people that are more comfortable typing out questions.
Speed: If approved, it’s common for funding to be received within a week. If you are under a time constraint, speak with the lender before filling out an application to better understand the timeline for receiving funds. The loans are frequently reviewed at a fast pace so individuals will usually have a better idea about where they stand in the loan process by the end of the week.
Mistakes to Avoid When Choosing Cannabis Equipment Lenders
When deciding on a cannabis equipment lender, avoid making these mistakes. Avoid high-interest rates, take your time reading the contract, and refrain from committing to an overly ambitious loan. When trying to grow a business, simple mistakes have the potential to add up. Set aside time to read the contract and think about enlisting the help of an industry professional.
High-Interest Rates: High-interest rates potentially hinder a borrower’s ability to repay a loan. For example, interest rates on cannabis-related loans have the ability to reach 15% or more. Keep in mind that the interest payments made on larger loans will likely quickly add up. Make sure that you have enough funds to cover the principal and interest before selecting a certain cannabis equipment loan.
Not Reading a Contract: Failing to read a contract can negatively impact a business’s success. For example, the contracts often stipulate details such as fees that will likely be important to know about in order to compare loans beforehand. If you are unfamiliar with contracts, think about asking a professional to guide you through the process. Set aside time to thoroughly read the contract for the cannabis equipment because this is an exceptionally important area of interest for people dedicated to successfully growing their brand and business.
Taking Out Too Large of a Loan: It may feel tempting to take out the largest loan amount that you qualify for, but such a strategy will likely work to your disadvantage in the future. Note that your maximum loan amount will not always be the ideal amount of funds because of the additional risk that it will tie to your business. For example, larger loans frequently have bigger payments due to interest. The larger loans have the ability to make it increasingly likely that a borrower will be unable to make prompt and frequent payments. Calculate a reasonable loan amount that considers additional fees to create a buffer to safeguard your finances in the case of an unforeseen expense. Leave a little wiggle room when deciding on your total loan amount to have the best chance of maximizing the loan and successfully paying it off.
Missing A Disclosure: When examining a contract, pay close attention to the disclosures. The disclosures allow an interested individual to gain a deeper understanding of the loan. This information is useful for an individual because it assists in managing expectations and creating more realistic goals.
Frequently Asked Questions
The cannabis industry continues to evolve as new rules and regulations come into play. When researching the best cannabis equipment lender, think about potential rates, useful savings, and the overall direction of the business. If you have any questions, think about reaching out to an industry professional or spending time scrolling one of the equipment lender websites.
Are cannabis loans legal in most states?
When contemplating one of the various cannabis lenders, keep in mind that the legality of the cannabis industry tends to vary depending on the state. Currently, around 20 states allow recreational marijuana use. In general, the level of legality varies from states with strong bans to states where cannabis is accepted for recreational use. Although hemp is now viewed through the federal lens as a legal agricultural commodity, the federal government remains less lenient with marijuana which remains illegal. Overall, the legality of cannabis-related loans depends on a state-by-state basis and many states with legalized cannabis loans still have a low amount of loan options due to risk-averse banks. Banks are typically considered cautious when it comes to investment opportunities. Fortunately, the amount of banks and alternative lenders willing to lend to the cannabis industry has steadily grown over the years.
How do I get a cannabis equipment loan?
Individuals interested in getting a cannabis equipment loan have the ability to research the loans provided depending on the state. If you are having difficulty finding a bank that’s able to provide a loan, consider researching alternative funding options such as crowdfunding, capital marketplaces, and venture capital firms. When applying for a cannabis equipment loan, consider your credit score in combination with other potential factors such as annual revenue, and overall financial history.