When it comes to marijuana businesses, getting financing might not be as straightforward as it is for other types of businesses. Even though marijuana has been decriminalized in many states and recreational use has been allowed in some, the federal government still considers marijuana an illegal substance and it remains on the list of schedule one drugs.
Since banks are regulated by the federal government, it follows that they are not allowed to transact with marijuana companies as the business is still considered illegal at the federal government level. The other constraint facing cannabis businesses is the relative newness of the industry. This newness can make traditional banks shy away from the sector as they do not fully understand the model, the market and the risks involved.
But lucky enough cannabis businesses have many other alternatives when it comes to financing their companies. Here are some of the options that are available.
Banks
While the first paragraph talked about why the banks might not give your cannabis business a loan, it does not completely rule it out. You should approach local and state financial entities to see if they might be willing to finance you. Many banks are still trying to understand the sector and you might find a lender who is willing to give you a cannabis business loan if only to learn more about the industry and its dynamics.
Venture Capital
This is a type of equity funding where investors take higher than average risks to finance promising start-ups and other businesses. Venture capital providers often take a very high payoff to reflect the risk that they are taking in your business. For a green enterprise, this is an attractive option as the high risk/high return dynamic associated with the cannabis business might be just what venture capital providers are looking for.
Angel Investors
Angel investors are investors who finance a start-up company in return for an agreed amount of share equity. Angel investors often finance companies at very early stages of development when most investors would be unwilling to come on board. The cannabis industry has its fair share of angel investors and there are numerous resources that can help you get the kind of investors you are looking for. You can also attend industry networking events and similar gathering to get to meet such investors as well as get referrals from other entrepreneurs.
Crowdfunding
Crowdfunding is a fairly new method of raising capital which has grown with the rise of social media. Under this approach, you can raise money from hundreds of individuals, each contributing a small amount of money. They in return can get equity or rewards depending on the setup. There are numerous crowdfunding websites online and it might be worth getting familiar with them.
Cannabis Business Loan Lenders
There is also a very small group of lenders that specialize in giving marijuana business loans. Some of the commons loans they provide include unsecured capital loans, marijuana real estate loans, and marijuana equipment loans. Such lenders are undisputedly one of the best financing options you can consider because of their specialization; they often fully understand the in’s and out’s of marijuana businesses and can offer loan flexibility to cannabis business owners.
Why Not Work with Lender 420 Today?
At Lender 420, we specialize in financing cannabis enterprises and providing them with customized financial solutions. We finance cannabis real estate , capital costs as well as equipment costs. The fact that we specialize in this sector gives us a special insight into the dynamics of the industry that might be of great interest to you.
Our diverse set of programs provides entrepreneurs with options when financing their businesses. Our pre-approval process is easy and stress-free. We encourage interested entrepreneurs to apply pro-actively to get an idea of the amount of capital they’re eligible to lend.
Contact us at info@lender420.com or via our office line at 424-320-3800 to speak to one of our experts about what program is best for you and your business.