Business Loans That Fund Equipment Purchases

If you own a cannabis company, you probably already know how challenging it is to comply with legal requirements, particularly when it comes to obtaining licenses and permits, buying property and raising capital.

The majority of cannabis business owners have a very difficult time finding small-business loans. Despite being legal in your state, cannabis is still a Schedule I controlled substance under federal law, so financial institutions are typically unable to handle any capital related to the drug, including equipment finance.

Equipment financing options and cannabis business funding have gradually increased as activist groups and politicians have pushed for legislation on this subject. Because of this, you can find alternative, private lenders and online marketplaces that can provide financing options for cannabis equipment.

How Do Business Loans Work?

Most businesses can be eligible for loans for cannabis equipment financing. The business, credit history, current trade lines, debt ratio and equipment quotes provided by the business owner are all taken into consideration when approving equipment financing.

1. Decide Whether You Want New or Used Equipment

Think about whether new or used equipment is better for your needs. New technology offers the best performance and the newest features. But you can find discounts on older, gently used equipment.

2. Determine Your Financial Needs 

Once you’ve determined what you need in terms of equipment and the cost, determine how you intend to use the funds. Are you paying a one-time or ongoing expense? Are you factoring maintenance costs? 

3. Create a Business Plan

You’ll want to provide a solid business plan along with the last few years' worth of financial records, including those for your checking, savings and mortgage accounts. Provide proof of concept and specifics on how your legal cannabis business will generate revenue to repay the equipment loan on time. Try to be as thorough as you can.

4. Gather Documentation for Your Equipment Finance Loan

Some documents you’ll need to apply for an equipment loan include:

• Cannabis deck and debt schedule
• Driver’s license
• Business license
• Employer Identification Number
• Voided business check 
• Commercial bank statements for the last six months
• Personal financial statements 
• Year-to-date profit-and-loss statement and balance sheet 
• Five-year forecast
• Executive summary
• Receivables report 
• Inventory list
• Purchase orders

5. Review the Various Types of Business Loans

You have options for specialty financing that focus on the marijuana sector. These lenders provide a financing plan for companies that deal with medical marijuana and cannabis dispensaries. Alternative lenders focused on the marijuana industry are skilled at navigating both state and local laws. They can assist companies with a range of cannabis equipment financing, including lines of credit or loans for working capital.

Because cannabis equipment loans aren’t issued by traditional banks and credit unions, the loan terms and interest rates will vary. Typically, private financing loans have higher interest rates and shorter terms than most business loans because of the risk associated with the industry.

6. Check the Lender’s Requirements

Some lenders will require you to be in operation for a specific period of time and/or have a certain amount in annual revenue. Credit requirements may not be as strict when it comes to a cannabis equipment lease if the equipment itself serves as collateral. The credit requirements vary, but you should be approved for an equipment loan with a fair credit score of around 650.

Business Loans vs. Renting Equipment

Renting or leasing cannabis business equipment is an alternative option for business owners who need equipment but can’t qualify for a loan. For items that need to be replaced frequently, renting is often ideal. For something you want to use for a long time, purchasing may be preferable. But just because you have the money on hand to make an outright purchase doesn't mean you should. Depending on your business objectives, that money might be better used somewhere else. With the help of business loans, you can slowly pay off your equipment at a low-interest rate.

Considerations With Business Equipment Loans:

• Owning can be cheaper than renting long term.
• You are responsible for maintaining and repairing the equipment.
• Financing is usually short-term.
• The equipment can be resold.

Considerations With Renting Business Equipment

• Renting can be pricey if you need the equipment daily.
• Does the rental company handle repairs and maintenance?
• You won’t need to store the equipment.
• You never own the equipment.
• Are there additional monthly expenses?

Common Equipment Used by Cannabis Businesses

Specialized equipment is essential for cannabis growers in particular. Some common pieces of equipment owners choose to purchase include: 

Retail Scales 

Scales have particular criteria in terms of operating capability, software integration and maintenance schedule for selling a product by weight. When scales are put into service, they must obtain National Type Evaluation Program (NTEP) approval and documentation, and they are referred to as "legal for commerce" scales.

HVAC Equipment

Specialized HVAC requirements are needed in cannabis grow rooms to maintain temperature and humidity for healthy crops. It's crucial that these units are energy-efficient and also help with airflow to mitigate strong odors because the HVAC must run continuously to keep the room at consistent temperatures.

Refrigerated Centrifuge

Refrigerated centrifuges are used to separate fluids, liquids or gasses according to their densities. This is accomplished by rapidly spinning the contents of the vessel, which forces heavier metals toward the exterior. 

Lighting Equipment

An ideal artificial lighting environment is crucial for indoor grows. Harvest success depends on grow lamps so the best lighting technology is something cannabis businesses should spend money on.

CO2 Extractors

CO2 extractors are required to produce products containing tetrahydrocannabinol (THC) or cannabidiol (CBD) because they extract oil from plant matter. They are the best kind of extraction equipment for business financing because the majority have a five-figure price tag.

How Does Canna Business Resources Provide Equipment Loans?

Canna Business Resources (CBR) provides instant approval equipment loans for cannabis equipment and other business-related expenses. One of the few cannabis lenders, CBR offers licensed operators and supporting businesses fully uncollateralized working capital financing. The loans are term financings that are tailored to the borrower's requirements. 

Unlike other business equipment loans that use the equipment as collateral, your equipment doesn’t secure the loan. CBR constructs a growth-oriented product that fits after carefully analyzing the actual cash flows of its clients.

Frequently Asked Questions