Choosing the Best Cannabis Business Loan Program
The $10 billion Cannabis Industry is growing fast with expectations of up to $50 billion by 2026. The cannabis and marijuana industry is composed of legal cultivators and producers, consumers, independent industrial standards bodies, ancillary products and services, and its industrial derivative, hemp. The cannabis business owners have been inhibited by federal government regulatory restrictions on both medical and recreational use for most of recent history, but the legal market has emerged rapidly as more governments legalize medical and adult-use of marijuana, hemp, and other cannabis products.
A Breakdown of the Cannabis Industry:
- Recreational Marijuana (3.2 Billion)·
- Medical Marijuana(5.1 Billion)
- CBD Oil (202 Million)·
- Hemp (820 Million)
Cannabis Businesses We Fund:
- Cannabis & Hemp Growers
- Marijuana-Infused Products
- Wholesale and Manufacturer’s
- Retail Marijuana Dispensary
- Medical Marijuana Products
- Cannabis Accessories
- Hemp Products
The cost of running Cannabis businesses are steep, and to make matters worse, the ability to get a small business loan to grow the business can be difficult. It all begins with the fact that the Cannabis industry on a federal level is an illegal small business. Traditional Banks and other lenders, in many cases, operate on and are subject to federal banking laws that make funding a Cannabis business impossible. So, it’s a non-starter if you walk into a bank looking for small business loans.
The good news, there are a few alternative business lenders and funding options, which include the AdvancePoint Capital marketplace, that has filled in the void in funding cannabis-based businesses.
What are the most common uses of Cannabis Business Financing?
- Working Capital·
- Cannabis Equipment Financing
- Business Expansion
- Cannabis Biotechnology
- Cultivation, Growing and Farming
- Hemp & CBD Products·
- Marijuana Product expansion·
- Marketing & Business Development
What Types of Cannabis Business Loans are Available?
1. Business Cash Advance for Cannabis Financing
Business Cash Advances (also known as a Purchase of Future Sales) advance a fixed “lump sum” of money with a discounted purchase price, also known as a specified amount, to payback. The advance is repaid by taking a fixed percentage of future overall sales, unlike a merchant cash advance which takes a percentage of future credit card sales. Fixed daily payments are collected daily or weekly by deducting from a business bank account which is based on the fixed set percentage of future sales. At the conclusion of every month, an evaluation is conducted of payments received versus monthly sales deposits. If the fixed payments are taken are more than the set future percentage of sales deposits than a refund back to the merchant can occur. Repayment continues under this monthly process until the payback amount is paid back in full. There is no term limit with advances as the fixed payback percentage ever changes yet sales do. The time frame to pay back depends on the volumes of those future overall sales. Expectations of repayment are set typically short term in nature for 6 to 18 months but again it may be longer or shorter depending on future overall sales. Documentation is limited to 1-page application and 3 months bank statements.
Rates: Factor Rates 1.10% up to 1.45%
Terms: Estimated payback periods are 6 to 18 months, but No term limit
Fees: 1% to 3% Origination Fee
Payments: Weekly, Bi-Weekly or in some cases daily payments Monday-Friday
Credit Score: All credit types from Poor to Excellent is considered
Documentation: 1-page Application, 3 months bank statements
Benefits and Best Uses of Business Cash Advance
Traditional financing is cheaper but the fact remains that business owners who are looking at this product do not qualify for traditional funding. A business cash advance is a great alternative to access capital for the business when the bank says no! There are no limitations for the use of money and can be used for a variety of different purposes but a majority of the reasons are cash flow to help the business.
Learn More About
Business Cash Advances
2. Cannabis Business Funding (Commercial Real Estate Collateral Based) Equity Financing
Business Funding based on securing commercial real estate as collateral is also a sound option. If you have a significant amount of equity in real estate, you may be able to use that in order to obtain financing for your company. This is a way for business owners to secure asset-based financing through the real estate they own.
Rates: 16-19% Interest Rates
Loan to Value: Up to 85% LTV
Collateral: Commercial Real Estate
3. Invoice Financing
Invoice financing advances the outstanding balance to a business owner to increase the speed of cash flow to the cannabis company or marijuana dispensary. This solution provides cash quickly and there is no need to wait for outstanding invoices to be collected and received by the client with invoice financing in place. Invoice financing has affordable costs ranging from 1% to 2.5% fee off of the face value of the invoice advanced.
Terms: No term limits
Fees: 1% to 3% fee based on Invoice. Monthly Service fees may apply depending on the volume of invoices factored
Credit Standards: Credit of the Clients need to be favorable NOT the business owner advancing off invoices.
Learn More About
4. Purchase Order Financing
Purchase Order financing offers businesses the ability to raise capital to pay suppliers upfront for verified purchase orders. Purchase order loans will finance an entire order or a portion of it, depending on the purchase order funder. When the supplier is ready to ship the order, the purchase order financing company collects payment directly from the customer. The purchase order funder will subtract their fees and then sends the balance of the invoice to your business. Purchase order financing is not loans, but an advance.
Terms: No term limits
Fees: 1% to 5% fee for each Purchase Order.
Credit Score: All parties need favorable business credit history but all credit considered
Learn More About
Purchase Order Financing
The fast, convenient and straightforward way to get the money you need for your business – now! Get Your Quote Today by filling out our simple form.
Advice, Tips, Warnings about Cannabis Business Financing
Like any other business funding product starts with asking the question, why? What are you using the money for? Are you looking at business financing because you were declined for more traditional options? How does getting financing help your business? Did you use a cost versus benefit analysis? Make sure that you’re asking all of the questions and looking for the right answers when deciding between loans and funding products.
How to Apply for Cannabis Business Financing?
AdvancePoint Capital offers an easy business funding experience that can help answer any questions you may have. Our customers love the fast, streamlined process and high approval rates due to options available that come from working with us — and their businesses are thriving because of it.
Applying for a loan with AdvancePoint Capital is as simple as a 1, 2, 3 process. Start with this online form, then fill out the short application page, wait a few hours for your approval, and then get your money!
Frequently Asked Questions
When business owners are turned down by traditional funding sources like banks or credit unions, account receivable financing products can set in to fill the gap. Speed to access capital as well as flexible credit requirements make this financing option desirable for many businesses. So, choosing the right cannabis business loans for your marijuana operation requires some research and weighing the options.
The short answer is Yes, it will be difficult to obtain funding or cannabis business loans for most businesses. Most traditional options for financing a small business is not available to the Cannabis industry, mostly due to federal regulations. The marijuana industry, both medical and for recreational use, is riddled with federal law roadblocks that make funding difficult, both for borrowers and lenders.
Yes, businesses can get approved for funding with invoice financing, as well as a Business Cash Advance even if your credit is poor. Asset-Based Financing does take a tougher stance with credit so you will need to talk to the lender directly to see if this product is available if you have bad credit. Invoice financing does not look at business credit at all so that may be an attractive option if you are that type of business that invoices customers on a regular basis. Business Cash Advance will accept bad credit but your terms will be impacted based on the personal credit, so many businesses have to weigh their options carefully.
The short answer is No, businesses cannot get start-up loans because there is no track record of sales or receivables with the start-up business. Prior company ownership experience will not help you obtain funding for a marijuana or cannabis operation. Fresh businesses will have to look for alternative options and funding solutions to make sure they get the lending they need.
The fast, convenient, and straightforward way to get the money you need for your small business – now!
Get your quote today by filling out our simple form.