While many states are making medical and recreational cannabis legal, the federal law states it as a schedule 1 drug. So needless to say, it’s not necessarily an easy task to get funding – especially through traditional means.
A large majority of banks in the US do not give out loans for medical marijuana businesses; which isn’t to say there aren’t some that do, but they are few and far between. However, fear not, it’s not impossible to receive financial assistance when it comes to starting your own medical marijuana dispensary.
So how do you get financing if the bigger banks won’t fund it? Some people do it through self-funding, but for many, that might not be the most viable option. For anyone a little short on funding, loan and equity financing seem to be the easiest ways to go about funding.
As of right now, alternate forms of financing are the biggest contributors to medical marijuana dispensary funding. And the question now becomes, “How do you get a loan for a medical marijuana dispensary?”
How do you get a loan for a medical marijuana dispensary?
Financial companies as alternate sources.
Even though big banks won’t be the ones dishing out the cash anytime soon, there are a few options for marijuantrepreneurs. And just like any other business, these financial companies typically look at the three Cs: Credit, Cash Flow, and Collateral.
When it comes to credit, lenders will look at both personal and business credit to determine loan qualification. While they mostly look for scores +660, they’ll also look into anything ranging from 600 to 800. And the main purpose of this is to really figure out whether you’re a safe bet and are financially responsible.
As for cash flow, lenders want to know how much money you have currently in your bank; with the minimum being $1,000 and the ideal being $5,000. They also want to know how much revenue you’re making on a monthly and annual basis.
And then collateral is pretty straightforward. It’s essentially about what you can offer lenders in case things go south.
When it comes to what type of loan you’re looking for, it really just depends on what you need the money to cover. If it’s a new business, a start-up loan might be the best option, whereas, in more established businesses, you can look into SBAs, business express loans, revenue-based loans/advances, and equipment financing. Any of these loans can range between a maximum limit of $350,000 all the way up to $1 million. It’s best to have a conversation with the lenders to figure out which one best fits your current needs.
Some other tips and information.
Because cannabis is illegal on the federal level, it’s still a bit of a risk getting into the medical marijuana business. It’s best the maintain honest and ethical information about your business and make sure all of your financial information is as transparent as possible.
And beyond that, just maintain a good line of credit, and maintain a consistent payment schedule with lenders.
Finance Factory helps medical marijuana dispensaries establish and grow into successful businesses.
Finance Factory has a team of highly trained professionals who guide and educate clients so they can make the best and most informed decisions possible when looking at loans. They help you every step of the way and give you all of the information for your application. Their specialty is making and building relationships between small business owners and vetted lenders while offering great rates and affordable terms for everyone.
Interested in finding funding for your business? Finance Factory would love to help! If you’re looking to fund your business within the next 30 to 90 days for $25,000 to $500,00 and have a credit score of 660 or better, let’s chat! Get pre-qualified right now with our quick-step pre-qualification form! And don’t worry, this will not result in a hard credit inquiry of sensitive information. We just want to learn more about you and your business. Click below to get started!