What Types of Financing Options are Available for Cannabis Businesses?

Cannabis Businesses

What Types of Financing Options are Available for Cannabis Businesses?

When you are starting a cannabis business or marijuana related business, it’s important to know the types of funding options you can choose from to obtain working capital and get your business funded. Let’s start with what types of funding options there are in the US market  for Cannabis Businesses. 

Here are the types of financing methods available for cannabis related businesses:

 

  • Consulting Companies: Consultants, like Cannabis Credit Lines, specialize in building and obtain funding for cannabis businesses to empower them with the tools and working capital resources they need to meet their unique goals.

 

  • Business lines of credit: Alternative financing companies such as Cannabis Credit Lines also offer lines of credit to help cannabis businesses pay for their expenses.

 

  • Real estate loansCannabis Credit Lines has relations with hundreds of private lenders who will approve your business for a secured loan against your real estate property that can be used to buy or refinance the buildings or raw land you need to run your cannabis business.

 

  • Equipment leases and rentals. Also available through Cannabis Credit Lines, any cannabis businesses can apply for a loan or line of credit to pay for any device, equipment, machine, hardware, software, vehicles and more.

 

  • Crowdfunding.  The JOBS Act of 2012 enabled the US Securities and Exchange Commission (SEC) to allow anyone to invest a small portion of their incomes into small companies in exchange for a stake (or Share) in the business. Now that cannabis companies can avail of crowdfunding, they can raise up to $1 million this way in exchange for giving up equity/future profit share and diluting their limited number of shares in the company. Fundanna and CannaFundr are a few equity-based crowdfunding platforms that specialize in the cannabis industry.

 

  • Financial Private Equity Firms.  Financial firms may be willing to offer short-term high-interest loans or funding for a large stake in your company.

 

  • Venture Capitalists.  In nearly all industries, you will find wealthy investors interested in helping small businesses grow, often in exchange for equity and future revenue share in the business.

 

  • Personal loans.  These require having good credit history with a good FICO score and enough income to show any lender that you can afford to take on a personal loan now and have the good character and history of repaying what you borrowed in the past.

 

  • Home equity loans.  Cannabis business owners have the option to borrow against the value of their houses with a home equity loan or line of credit.

Which should you use?

The answer depends on your business plan’s profit margins and timeline of events and what you are willing and able to give up in exchange for growing the business plan sooner than later.

You may complete an application by applying here.

How to Get Approved for Cannabis Business Funding

Cannabis business funding

Cannabis business funding is almost non-existent in the traditional banking industry. Traditional banks and Lenders will typically only approve a business loan or line of credit for roughly 10-20% max of the yearly gross revenue that the business made the year before.Almost every major savings and loans bank in the US.

Cannabis Credit Lines helps startup and existing business owners obtain more working capital through their proprietary lending techniques and proven experience in consulting with business owners on how to obtain Cannabis business funding

This table gives a short summary to the Underwriting Guidelines for Cannabis business funding:

Underwriting Requirements to Get Approved

Cannabis Credit Lines

Other lenders

Good Personal Credit Score (Minimum 700 and above)

YES

Yes

Funding Up to $250K *per borrower

YES

Yes

Introductory Interest of 0% for 12 Months

YES

No

Collateral (Secured)

Not required

Required

Personal and Business Tax Returns

Not required

Required

Bank Statements

Not required

Required

Balance Sheet

Not required

Required

Profit and Loss Statement

Not required

Required

Personal Financial Statement

Not required

Required

Subject to Annual Review

Not required

Required

 

Banks can issue Non-Traditional Lines of Credit just like any credit card in your pocket that the business may use to make purchases and other transactions. Non-Traditional bank lending techniques have allowed for less restrictions in place to approve a business line of credit application. A Non-Traditional Line of Credit can become approved through meeting the following criteria:

  • Personal FICO Credit Scores ranging from Okay to Excellent.
  • Utilization Percentage and Available Credit Balances. Creditors care about how much you credit you utilize and what available credit space you have on your credit report.
  • Debt to Income Ratio. Creditors care about how much your monthly bills are in relation to how much income you make monthly.

In a Non-Traditional Business Line of Credit, each bank has its own standards for approving credit limits based on the borrower’s profile and what that creditor values in considering an amount in approving an application.

Here’s how the process normally looks like for getting a Traditional Loan from a bank or lender:

 

You walk into a bank and ask for a business loan. The banker starts building your offer and begins to ask questions and information about you and your business to qualify you for one of their loans. Traditional bank loans are more restrictive in their underwriting guidelines, meaning they want to see more in-depth analysis of the borrower’s financial profile.

For Amounts less than $100,000, most banks and lenders follow these underwriting guidelines to approve a Term Loan or Line of Credit application:

 

  • The process usually takes about 3 months to underwrite Cannabis business funding
  • A sound business plan showing the opportunity, the target market, the business model, a marketing and sales strategy, the competition, a financial analysis with projections for the near and far future, background of the team of owners and staff and their experience, implantation plan with an outline for the timeline of events.

 

  • 2 years personal and business tax returns
    • They require at least 1 year showing profit

 

  • 6 months of Bank Statements to show liquidity and the power to repay the loan within the first initial time frames

 

  • A Profit and Loss Statement to measure all the expenses and revenues of the business

 

  • A Balance Sheet to measure and show all assets, liabilities, and owner’s equity or stockholder’s equity. This is very useful in determining the amount of the company’s working capital

 

  • A Personal Financial Statement to list a schedule of all the owner’s assets and liabilities

 

  • Good personal FICO Credit Scores to show the borrower’s character and credit history in repaying any debts in the past and present

 

  • A clear measurement of your Debt-to-Income Ratio. This is a useful strategy in measuring and determining how much money you have left over after you have finished paying all your obligatory bills and have leftover money available to spend for repaying a new loan that you are considering to take on to expand your business.

The same underwriting guidelines for Cannabis business funding can be applied for amounts higher than $100,000 including the requirement of having a minimum percentage amount of cash reserves to have available from borrower’s own bank account at all times.

Once all these requirements for underwriting have been met and satisfied, these banks and lenders will typically approve a credit limit equivalent to roughly 10-20% max of the yearly gross revenue that the business made the year before.

So as a Startup Cannabis Company, one quick and easy solution to get Cannabis business funding can be solved by getting funded with Cannabis Credit Lines!

You may complete an application here.

How to Get Approved for a Loan Cannabis Loan

Cannabis Loan

This is what a bank or lender looks at when a borrower approaches them for a cannabis loan in the Cannabis Industry:  Startup Cannabis Company

Cash : this can be defined as the present and future Revenue and Sales from the business as shown through the deposits and available balances on the Bank Statements, along with the Financial Statements and Tax Returns of the business and person(s). (obviously if you had cash you wouldn’t need a Cannabis Loan!)

Collateral : this can be defined as a something tangible than can pledged as security for repayment of a loan, to be forfeited in the event of a default for example Real Estate Property is the most common form of collateral.

Credit Score: a number assigned to a person that indicates to lenders their capacity to repay a loan. Credit scores typically range from 300 (poor) to 850 (Excellent).

What types of lending options are available to Startup Cannabis Company businesses in the market?

 

Startup funding for a Cannabis Loan for a Startup Cannabis company is almost non-existent in the traditional banking industry. Traditional banks and Lenders will typically only approve a business loan or line of credit for roughly 10-20% max of the yearly gross revenue that the business made the year before. Almost every major savings and loans bank in the US.

Here’s how the process traditionally looks like:

 

You walk into a bank and ask for a business loan. The banker starts building your offer and begins to ask questions and information about you and your business to qualify you for one of their loans. Traditional bank loans are more restrictive in their underwriting guidelines, meaning they want to see more in-depth analysis of the borrower’s financial profile.

For Amounts less than $100,000, most banks and lenders follow these underwriting guidelines to approve a Term Loan or Line of Credit application:

  • The process usually takes about 3 months to underwrite

 

  • A sound business plan showing the opportunity, the target market, the business model, a marketing and sales strategy, the competition, a financial analysis with projections for the near and far future, background of the team of owners and staff and their experience, implantation plan with an outline for the timeline of events.

 

  • 2 years personal and business tax returns

They require at least 1 year showing profit

 

  • 6 months of Bank Statements to show liquidity and the power to repay the loan within the first initial time frames

 

  • A Profit and Loss Statement to measure all the expenses and revenues of the business

 

  • A Balance Sheet to measure and show all assets, liabilities, and owner’s equity or stockholder’s equity. This is very useful in determining the amount of the company’s working capital

 

  • A Personal Financial Statement to list a schedule of all the owner’s assets and liabilities

 

  • Good personal FICO Credit Scores to show the borrower’s character and credit history in repaying any debts in the past and present

 

  • A clear measurement of your Debt-to-Income Ratio. This is a useful strategy in measuring and determining how much money you have left over after you have finished paying all your obligatory bills and have leftover money available to spend for repaying a new loan that you are considering to take on to expand your business.

The same underwriting guidelines can be applied for amounts higher than $100,000 including the requirement of having a minimum percentage amount of cash reserves to have available from borrower’s own bank account at all times.

Once all these requirements for underwriting have been met and satisfied, these banks and lenders will typically approve a credit limit equivalent to roughly 10-20% max of the yearly gross revenue that the business made the year before.

So as a Startup Cannabis Company, one quick and easy solution to get a Cannabis Loan and add more funding to the capital stack can be solved by Cannabis Credit Lines.

Banks can issue Non-Traditional Lines of Credit that the business may use to make purchases and other transactions. Non-Traditional bank lending techniques have allowed for less restrictions in place to approve a business line of credit application. A Non-Traditional Line of Credit can become approved through meeting the following criteria:

 

  • Utilization Percentage and Available Credit Balances. Creditors care about how much you credit you utilize and what available credit space you have on your credit report.

 

  • Debt to Income Ratio. Creditors care about how much your monthly bills are in relation to how much income you make monthly.

In a Non-Traditional Business Line of Credit, each bank has its own standards for approving credit limits based on the borrower’s profile and what that creditor values in considering an amount in approving an application’s credit limit.

This table gives a short summary to the Underwriting Guidelines for Cannabis Credit Lines for a Cannabis Loan:

Underwriting Requirements to Get Approved

Cannabis Credit Lines

Other lenders

Good Personal Credit Score (Minimum 700 and above)

YES

Yes

Funding Up to $250K *per borrower

YES

Yes

Introductory Interest of 0% for 12 Months

YES

No

Collateral (Secured)

Not required

Required

Personal and Business Tax Returns

Not required

Required

Bank Statements

Not required

Required

Balance Sheet

Not required

Required

Profit and Loss Statement

Not required

Required

Personal Financial Statement

Not required

Required

Subject to Annual Review

Not required

Required

You may complete an application for a Cannabis Loan here. 

Tips on Financing a Startup Cannabis Company

startup cannabis

Financing a startup Cannabis Company by taking on debt

This technique for financing a business or startup cannabis business relies upon your strategies for success and what you require done in return for what you will surrender

Defining Debt Financing

 

Debt financing is a process that involves borrower taking debt in the form of a line of credit or loan in order to borrow funds from investor, lender or bank in exchange for repaying the debt with fees and interest on an decided upon timelines and terms.

This financing form is based on the profitability turnaround times and profit margin on the industry.

Let’s take the example of a manufacturer and a cultivator. An indoor harvest cycle for growing cannabis ranges typically from eight to ten weeks when carried out at indoors. Remember in eliminating variables, errors and scaling larger operations, consistency is the key within the supply chain. The harvest time of the cultivator can produce 5-6 harvest annually. Each harvest delivers a certain number of products in order to fabricate into more items as well as a discount to a wholesaler with a business channel as of now set up to supply the interest in the retail commercial centre to customers in legitimized states and urban areas in the US.

Each harvest gives a chance to made revenue by selling the items from the harvests to take care of the demand in the discount and retail markets. This turnaround time would effortlessly enable an entrepreneur to assume certain debt financing tools to reimburse any startup costs acquired in their underlying marketable strategy, for example, hardware, stock, finance, lawful charges, land, utilities, and so forth. before they expand into more elevated amounts of financing and tasks.

Startup Cannabis Business lending in the USA

 

When it comes to getting approved for a line of credit or a loan for a startup cannabis business, here are a few approaches borrower looks at:

  1. Credit Score– This is a number assigned to an individual that indicates to lenders regarding their ability to pay the loan back. This type of score usually ranges from 300 to 850.
  2. Cash: This can be characterized as the present and future Revenue and Sales from the business as appeared through the stores and accessible adjusts on the Bank Statements, alongside the Financial Statements and Tax Returns of the business and person(s).
  3. Collateral: this can be characterized as a something substantial than can promise as security for loan repayment, to be relinquished in case of a default, for example, Real Estate Property is the most well-known type of guarantee or collateral.

Different types of Startup Cannabis business Loans in the USA

 

  • In the traditional banking industry, easy startup cannabis business loans for Cannnabis is the almost non-existent. Traditional lenders, as well as banks, only approve the line of credit or business loan for 10-20% max for the annual gross revenue that a business made the year before. Now the question is how the process actually looks like?

So, here it is-
Lets’ say you walk into the bank and ask for a business loan. The banker asks you some questions and information about you and your business and starts making offers to qualify you for one of their loans. Usually, Conventional bank loans are more prohibitive in their guaranteeing rules, which means they need to see more top to bottom analysis of the borrower’s financial profile. If the amount is less than $100,000 most lenders and banks follow the underwriting guidelines to approve either line of credit application or a term loan:

  • The entire process usually takes approx three months to underwrite.
  • A sound marketable strategy demonstrating the chance, the objective market, the plan of action, a marketing and deals technique, the opposition, a money-related investigation with projections for the close and far future, foundation of the team of owners and staff and their experience, implantation plan with a framework for the timetable of occasions.
  • 2 Years of business and personal tax returns in which they need to show a 1-year profit
  • 6 months bank statements to show the liquidity and their capability to repay the loan on time.
  • Lastly, a profit and loss statement to measure all the business revenue and expenses.
  • A balance sheet that measures and present all the liabilities, assets and the equity of stockholders and owner’s equity. This plays a vital role in determining the amount of working capital of a company.
  • A personal Financial statement that lists a schedule of all the liabilities and assets of the owner.
  • Improved FISCO Credit scores that show the credit history and character of the borrowers in repaying the debts in the past and present.
  • A reasonable estimation of your Debt-to-Income Ratio. This is a valuable procedure in estimating and deciding how much cash you have left over after you have wrapped up the entirety of your required bills and have remaining cash accessible to spend for repaying another advance that you are thinking about to go up against to extend your business.
  • The similar underwriting guidelines can be applied if the amount is higher than $100,000. When the requirements for these underwriting have been satisfied and met, the lenders and banks approve a credit limit that is equivalent to 10-20% roughly of the annual gross value, a business made a year before.Any startup Cannabis Company can easily get funding solution by Cannabis Credit Lines. Banks or financial institutions can issue non-traditional lines of credit for business for purchasing and for other transactions. The lending techniques of the non-traditional bank have fewer restrictions when it comes to approving an application of a business line of credit. In order to approve a non-traditional line of credit, you have to meet the following criteria:
  • Individual FICO Credit Scores going from good to better.
  • Use Percentage and Available Credit Balances. Banks care about the amount you credit you use and what accessible credit space you have on your credit report.
  • Debt to Income Ratio. Creditors care about how much your monthly bills are in connection to how much salary you make month to month.To wrap the post, in a Non-Traditional Business Line of Credit, each bank has its own principles for supporting credit limits dependent on the borrower’s profile and what that creditor quality in thinking about an amount in endorsing an application.

This table gives a short summary to the Underwriting Guidelines for Startup Cannabis Credit Lines:

Underwriting Requirements to Get Approved

Cannabis Credit Lines

Other lenders

Good Personal Credit Score (Minimum 700 and above)

YES

Yes

Funding Up to $250K *per borrower

YES

Yes

Introductory Interest of 0% for 12 Months

YES

No

Collateral (Secured)

Not required

Required

Personal and Business Tax Returns

Not required

Required

Bank Statements

Not required

Required

Balance Sheet

Not required

Required

Profit and Loss Statement

Not required

Required

Personal Financial Statement

Not required

Required

Subject to Annual Review

Not required

Required

You may complete an application for a startup cannabis loan here

How To Finance Your Cannabis Business

finance your cannabis business

Finance Your Cannabis Business

One of the keys in owning a successful cannabis business venture and marijuana related business, aside from having experience, connections, and sheer willpower, is having the right amount of capital and financial backing to make your company a successful one. We will explain how to finance your cannabis business.

The business will have expenses to pay for, and without the seed capital and future capital to make those payments in the beginning or throughout its course, the company growth will be delayed and the potential revenue that the owners and shareholders are supposed to receive from that business will also be delayed.

Every business in this industry has a risk present – whether it’s legal issues, employment issues, unforeseen forces of nature etc. – diversifying that risk can be mostly solved with the addition of working capital to prepare for and overcome any obstacle along the journey.

That is why it is important to know what your options are in obtaining capital and financing to finance your cannabis business or startup business and expand your growth at a faster pace.

Here are a few ways you can finance your Cannabis Business:

 

  • Equity Financing

    • This method involves the you as the borrower giving up a portion of your future revenue in order to repay the borrower money. This also involves giving up shares and stocks in your company to an investor for a specific amount of borrowed money. This can be good and bad depending on the business model and business plans for the future. Businesses who give up equity run the risk of diluting their ownership of the company and therefore losing control over the company. The reason why is because shares are limited within a company so the borrowers must be cautious when giving up equity to build funding for the business.

 

  • Debt Financing

    • This method involves the borrower taking on debt in the form of a loan or line of credit to borrow funds from a bank/lender/investor in exchange for repaying the debt with interest and fees on an agreed upon terms and timeline. This form of financing is most popular based on this industry’s profit margins and profitability turnaround times

Which form of financing should you choose to finance your cannabis business?

 

That depends on your business plans and what you need done in exchange for what you are willing to give up.

Let’s take a cultivator and a manufacturer as an example. An indoor harvest cycle for growing cannabis typically ranges from 8 to 10 weeks when done indoors. (Indoors are also efficient in creating consistent batches of cannabis products to supply the demand within the market place.) Consistency is key in scaling larger operations and eliminating variables and errors within the supply chain. A cultivator’s harvest times can produce 5-6 harvests a year. Each harvest produces a certain number of product to manufacture into more products and/or wholesale to a distributor with a sales channel already setup to supply the demand in the retail market place to consumers in legalized states and cities within the US. Every harvest provides an opportunity for revenue to be created by selling the products from the harvests to meet the demand in the wholesale and retail markets. This turnaround time would easily allow a business owner to take on certain debt financing instruments to repay any startup costs incurred within their initial business plan such as equipment, inventory, payroll, legal fees, real estate, utilities, etc., before they expand into higher levels of financing and operations.

Let’s breakdown the areas for what you can get debt financing and a loan or line of credit approved and based on:

 

Cash : this can be defined as the present and future Revenue and Sales from the business as shown through the deposits and available balances on the Bank Statements, along with the Financial Statements and Tax Returns of the business and person(s).

Collateral : this can be defined as a something tangible than can pledged as security for repayment of a loan, to be forfeited in the event of a default for example Real Estate Property is the most common form of collateral.

Credit Score: a number assigned to a person that indicates to lenders their capacity to repay a loan. Credit scores typically range from 300 (poor) to 850 (Excellent).

Now that we understand how to get approved for a cannabis business for debt financing, let’s examine the types of debt financing options available in the lending market to finance your cannabis business.

Startup funding is almost non-existent in the traditional banking industry. Traditional banks and Lenders will typically only approve a business loan or line of credit for roughly 10-20% max of the yearly gross revenue that the business made the year before. –Almost every major savings and loans bank in the US.

Here’s how the process normally looks like to finance your cannabis business:

You walk into a bank and ask for a business loan. The banker starts building your offer and begins to ask questions and information about you and your business to qualify you for one of their loans. Traditional bank loans are more restrictive in their underwriting guidelines, meaning they want to see more in-depth analysis of the borrower’s financial profile.

For Amounts less than $100,000, most banks and lenders follow these underwriting guidelines to approve a Term Loan or Line of Credit application:

  • The process usually takes about 3 months to underwrite
  • A sound business plan showing the opportunity, the target market, the business model, a marketing and sales strategy, the competition, a financial analysis with projections for the near and far future, background of the team of owners and staff and their experience, implantation plan with an outline for the timeline of events.
  • 2 years personal and business tax returns
    • They require at least 1 year showing profit
  • 6 months of Bank Statements to show liquidity and the power to repay the loan within the first initial time frames
  • A Profit and Loss Statement to measure all the expenses and revenues of the business
  • A Balance Sheet to measure and show all assets, liabilities, and owner’s equity or stockholder’s equity. This is very useful in determining the amount of the company’s working capital
  • A Personal Financial Statement to list a schedule of all the owner’s assets and liabilities
  • Good personal FICO Credit Scores to show the borrower’s character and credit history in repaying any debts in the past and present
  • A clear measurement of your Debt-to-Income Ratio. This is a useful strategy in measuring and determining how much money you have left over after you have finished paying all your obligatory bills and have leftover money available to spend for repaying a new loan that you are considering to take on to expand your business.

The same underwriting guidelines can be applied for amounts higher than $100,000 including the requirement of having a minimum percentage amount of cash reserves to have available from borrower’s own bank account at all times.

Once all these requirements for underwriting have been met and satisfied, these banks and lenders will typically approve a credit limit equivalent to roughly 10-20% max of the yearly gross revenue that the business made the year before.

So as a Startup Cannabis Company, one quick and easy solution to get funding can be solved by using Cannabis Credit Lines.

Banks can issue Non-Traditional Lines of Credit in the form of a credit cards that the business may use to make purchases and other transactions. Non-Traditional bank lending techniques have allowed for less restrictions in place to approve a business line of credit application. A Non-Traditional Line of Credit can become approved through meeting the following criteria:

  • Personal FICO Credit Scores ranging from Okay to Excellent.
  • Utilization Percentage and Available Credit Balances. Creditors care about how much you credit you utilize and what available credit space you have on your credit report.
  • Debt to Income Ratio. Creditors care about how much your monthly bills are in relation to how much income you make monthly.

In a Non-Traditional Business Line of Credit, each bank has its own standards for approving credit limits based on the borrower’s profile and what that creditor values in considering an amount in approving an application.

This table gives a short summary to the Underwriting Guidelines for Cannabis Credit Lines to finance your cannabis business:

Underwriting Requirements to Get Approved

Cannabis Credit Lines

Other lenders

Good Personal Credit Score (Minimum 700 and above)

YES

Yes

Funding Up to $250K *per borrower

YES

Yes

Introductory Interest of 0% for 12 Months

YES

No

Collateral (Secured)

Not required

Required

Personal and Business Tax Returns

Not required

Required

Bank Statements

Not required

Required

Balance Sheet

Not required

Required

Profit and Loss Statement

Not required

Required

Personal Financial Statement

Not required

Required

Subject to Annual Review

Not required

Required

If you need to finance your cannabis business, you may complete an application here.