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 loans: Cannabis 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.
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