Business owners are familiar with the ups and downs of cash flow. It’s common for companies to borrow money for supplies, payroll and other business needs.
When cash flow is delayed, seasonal slow-downs occur or expansion is underway, businesses may need a boost.
Business owners in the cannabis industry face an uphill battle when it comes to securing traditional loans. The good news is that your company can find needed financing through cannabis lenders.
What are cannabis lenders, and why are they preferable to traditional lending institutions? What do you need to know before you take out a business loan?
What is a Cannabis Lender?
Like traditional banks, cannabis lenders offer a range of financial resources, such as banking options, financing and processing solutions. The difference is that they cater specifically to the cannabis and CBD industries.
In the past, cannabis companies have had little option but to run cash businesses and turn to predatory private lenders offering unfavorable terms.
With increasing legalization and a growing market for cannabis goods, however, a new breed of lenders is bridging the gap by providing reliable funding and tools to help businesses increase efficiency and profit.
What Makes Cannabis Lenders a Better Choice than Banks for Financing?
Banks must comply with federal regulations and because cannabis has not been federally legalized, major banks won’t provide services like loans. They don’t want to wade through the risks and complexities, even for established businesses with proven profitability.
Cannabis business loans from dedicated lenders, on the other hand, come with a range of benefits. These lenders understand your industry, offer specific types of financing and provide a range of favorable options. They make it much easier for established businesses to secure needed funding.
5 Things Cannabis Business Owners Need to Know About Cannabis Lenders
Before you jump into a lending situation with the first company you come across, it’s important that you understand what lenders are looking for and what options are available to you.
1. What Cannabis Lenders Look For
Like most lenders, cannabis lenders are looking for a safe and solid investment. At the end of the day, they want to work with reliable companies that pose minimal risks. In short, they want every assurance that they’ll get their money back.
For this reason, they typically serve businesses that are already established and can provide a history of revenue. They’ll be interested in your industry experience and how long your current business has been operating. What you should look for is a lender that offers a range of options, including uncollateralized financing.
2. Multiple Lending Options Are Available
In addition to typical loans, cannabis financing from a reputable lender should include a number of options to fulfill different business needs. You’ll want to look for institutions that offer lines of credit, working capital, accounts receivable invoice financing, real estate financing and equipment financing, as well as banking and processing solutions.
Every business is unique, and the right lender understands this. It will help you find the lending options that suit your particular needs and preferences so that you have the best opportunity to thrive.
3. Deep Understanding of the Marijuana Industry
Business owners often wear a lot of hats, but that doesn’t necessarily mean you have the knowledge or experience to excel at every aspect of business management. You will have to rely on a range of other professionals to help you with everything from contracts to tax filings to financing.
Ideally, you’ll want to collaborate with professionals who understand your industry and your business.
Cannabis lenders necessarily have a deep understanding of the marijuana industry, which gives them the insight to offer products most suited to your operation. This is a major benefit when you’re seeking financial assistance but are unsure of the best type of lending for your needs.
4. Tools and Resources Are Available
When traditional banking and lending options are unavailable to you, it can be difficult to see a path forward for your business. Cannabis lenders provide the tools and resources you need to survive, thrive and expand your business.
The right banking, processing and financing solutions can help you to better manage your operations, streamline cash flow and grow your company.
5. Flexible Financing Within the Cannabis Industry
Working with traditional banks as a cannabis company is a complicated and frustrating process. The cannabis industry operates in a sort of limbo position because of the legal framework surrounding it.
Dozens of states have legalized marijuana for medical or recreational purposes and others have decriminalized it. Hemp CBD is federally legal. However, cannabis, in general, remains illegal at the federal level.
Banking institutions face high risks and legal complexities in serving the cannabis industry, so by and large, they don’t. To find flexible banking and lending options, cannabis companies must turn to a new class of lenders that focus specifically on cannabis clients.
Is Cannabis Lending Right for You?
If you are an established cannabis company searching for lending options that help you weather the ups and downs of cash flow or expand your operations, cannabis loans are the way to go. The right lender can provide financing resources designed specifically for your industry and the unique needs of your business.
Frequently Asked Questions
What is cannabis lending?
This type of lending caters specifically to cannabis businesses with a range of targeted and beneficial financing solutions.
Can U.S. banks lend to cannabis companies?
Even though many forms of cannabis have been legalized or decriminalized in dozens of states, marijuana remains illegal at the federal level. Banks must comply with federal regulations, which is why no major banking institutions in the U.S. currently service the cannabis industry.
Is owning a dispensary profitable?
Like any business, owning a dispensary can be profitable if you have a solid business plan, understand the market and manage operations effectively to profit and grow.