Cannabis Business Financing [Loan Providers]

Cannabis businesses in the US have fewer financing options are available for them. Although you might not be able to find cannabis business loans from major banks and other financing institutions, you may find alternative solutions elsewhere. This is our review of cannabis business loans in the US.

Cannabis Business Loans

Can a personal loan be used for cannabis business? Though difficult, you can still get a personal loan to fund your CBD-related business. However, make sure the lender does not have restrictions on how you can use your personal loan.  The risk is that personal loans attract higher interest rates and to get one, you need an excellent credit score. If you have a bad credit, find out how to improve your credit score. You must also have proof of income. You may also need to give your asset as collateral for a loan. Failure to repay the loan could hurt your credit score.

Providers of cannabis business loans in the U.S. include the following:

Dynamic Alternative Finance

Dynamic Alternative Finance provides cannabis business loans in the U.S. It is focused on offering real estate loans, cannabis equipment financing, equipment leases, working capital loans, and bridge loans.

Loan Qualifications

Dynamic Alternative Finance Cannabis business loans range from $250,000 to $10 million with loan term of 36 to 84 months. The APR varies. To qualify:

  • You must have a minimum credit score of 700 (for startup loans)
  • Your business must be at least two years old (for a working capital loan)
  • Have a business bank account (for working capital loans)
  • Have a Tax Identification Number (for startup loans)

 

United Capital Source

United Capital Source specializes in business loans for marijuana dispensaries. The lender offers various types of cannabis business funding including working capital loans, revenue-based business loans, and term loans through its network of lenders. Fortunately, the company offers cannabis business loand for bad credit. The loans require little documentation to process.

Loan Qualifications

United Capital Source offers cannabusiness loans ranging from $10,000 to $5 million with rates starting from 5%. Their loan term is 36 to 120 months. Requirements are:

  • You must have been in business for at least 6 months
  • Have a minimum credit score of 550
  • It requires a minimum annual revenue of $75,000
  • You must be banked because you will need to provide bank statements

 

Diamond Business Loans

Diamond Business Loans is a California-based lender that offers three main funding programs for cannabis businesses; an equipment program, an unsecured capital program, and a commercial real estate purchase program. It is the go-to lending firm if you have a solid credit score.

Loan Qualifications

Diamond Business Loans offers cannabusiness loans mainly based on your financial history. These loans have a low starting APR of 5.9%. Loan amounts range from $25,000 to $150,000 with a repayment term of 12 to 60 months. To qualify:

  • You must have a minimum personal credit score of 680
  • You must ensure there are no late payments listed on your credit report
  • No past bankruptcies
     

GoKapital

GoKapital is another canna business financing firm that offers quick business loans in the form of merchant cash advances. GoKapital offers a 95% loan approval rate.

Loan Qualifications

GoKapital’s cash advances range from $50,000 to $5 million as long as you meet their minimum qualifications. Their requirements are as follows:

  • You must have a FICO score of over 500
  • Your business must have annual sales of over $150,000
  • Your business must have been in operation for at least 4 months

 

First Down Funding

First Down Funding is a cannabis business loan provider that offers fee-based financing. This lender is not ideal for starting a cannabis business.

Loan Qualifications

First Down Funding gives loans ranging from $5,000 to $300,000 with a term of 12 to 120 months. It has the following requirements to qualify:

  • A minimum credit score of 400
  • It requires at least $300,000 in annual revenue
  • Your cannabis business must be established for at least two years

 

If you are a bitcoin holder, you can try companies that offer bitcoin backed loans such as BlockFi, CoinLoan, and Spectrocoin. With crypto backed loans, you do not need to have a perfect credit history or collateral since your bitcoin will be used as collateral.

Private Financing

It is impossible to get approved for a business loan by traditional banks. However, you can look for alternative cannabis business financing through angel investors, venture capital firms, private equity funds, or through crowdfunding platforms.

Angel Investors, Venture Capital Firms, and Private Equity Funds

Angel investors mostly seek to invest at the early stages of your cannabusiness but they typically deal with smaller amounts of money. Venture capital firms have also stepped into the cannabis industry and are providing funds for businesses that do not want to take on debt. Venture capitalists will invest in your company for the long term to help your cannabis business get started in exchange for an equity stake. If your business has an impressive business plan, then you can try AngelList and see if you can get a marijuana investor.

Some companies that give loans to cannabis businesses include the following:

Tuatara Capital, L.P

Tuatara Capital is a New York City-based venture capital and private equity firm interested in investing in the plant itself (cultivation). However, the firm also invests into sector like consumer and retail, processing, industrial services, technology, research and testing.
 

Casa Verde Capital

Casa Verde invests in ancillary cannabis businesses. Its investments span delivery, supply chain logistics, brands, and retail. The California-based venture capital firm prefers to invest in seed-stage, early-stage, and later stage companies in the cannabis sector.
 

Entourage Effect Capital, LLC

Entourage Effect Capital is private equity cannabis investment firm bases in Dallas, Texas. It is dedicated to investing throughout the cannabis value chain, from cultivation, vertically-integrated companies, brands, science and tech, and ancillary services.
 

Canna Angels, LLC

Canna Angels, LLC is a California-based angel investor consortium focused specifically on businesses within the cannabis industry. The firm provides investors with carefully vetted emerging companies directly involved in the cannabis industry. Their aim is to maximize the potential for both entrepreneurs and investors to succeed as partners in the growing cannabis industry. Cannabis businesses in California can get funding from investors through Canna Angels.
 

Privateer Holdings

Privateer Holdings is a private equity firm headquartered in Seattle, Washington. It invests in cannabis businesses that cultivate and distribute cannabis. The firm was founded in efforts to end cannabis prohibition and the social harms it causes.
 

Crowdfunding Platforms

Crowdfunding platforms are a viable option for obtaining financing for your cannabis business in the U.S. The US Securities and Exchange Commission (SEC) allows anyone to invest up to $2,000 in small businesses in exchange for a stake. To get maximum support on these platforms, have an exciting business plan and sell it to your audience through captivating copy and visuals. Build a narrative that people are willing to support. Well-known platforms that have approved some cannabis companies to raise funds on their platform include Indiegogo, Fundanna, and Kickstarter.

Borrowing from Friends and Family

You can also reach out to family and friends to help you with funds for your hemp-related business. When your business is still in its early stages, it is best to seek financial help from friends and family who believe in your business plan.

Starting Small and Reinvesting your Profits

One of the ways to start and grow your business is starting small. It helps your business to generate funds for its expansion. Instead of looking for business funding, you can use the revenues that your business is generating to fund your activities. It is less risky and gives your business time to grow.

Saving

You can save your venture and avoid borrowing funds. It is also a secure way of growing your business. However, it will take long before your business takes off. You can calculate how long you need to save for your CBD-related business by looking at your capital requirements.

Final Thoughts on Cannabis Business Financing

Cannabis-related businesses need financing to pay for inventory, hire new employees, funding renovation projects, real estate purchases, pay for new equipment, marketing and advertising, and more. Although getting cannabis business financing is tough in the U.S., it gets better each day as more states are passing new laws that regulate the use and cultivation of cannabis.

Daisy Neema is a graduate of Chuka University. She is a prolific writer and researcher and has an interest in finance. She also loves writing about businesses and startups.