New York is widely recognized as the global cannabis capital, with residents consuming 62.3 tonnes annually – creating an extremely profitable market and business model.
But this field doesn’t come without its challenges; most traditional investors still approach investing in cannabis with caution.
Invoice Financing
Cannabis businesses frequently face cash flow fluctuations when dealing with customers who offer long payment terms, making managing cash flow difficult for growing companies. Cannabis invoice financing provides companies with flexible cash flow by partially repaying outstanding invoices through this route. This makes this an appealing option for cultivators, distributors, manufacturers, and ancillary firms looking for steady cash flows.
Merchant cash advances provide another form of cannabis working capital funding backed by credit card sales. They’re particularly suitable for businesses like dispensaries and delivery services that rely heavily on credit card sales as revenue generators; merchant cash advances can even help finance projects like product inventory purchases, build-outs, debt payments, and unexpected expenses.
Private loans from alternative lenders are another viable solution for funding cannabis businesses, offering rates from 8-20 percent with terms spanning one to seven years. They’re handy for growers and manufacturers who require long-term funding options and help mitigate against possible industry decline.
Cannabis businesses require access to specialized cultivation and production equipment, making leasing an attractive financing solution. Most programs offering lease terms between five to 14 days typically include monthly payments and maintenance plans.
Cannabis entrepreneurs may find it challenging to secure the necessary funding, even with an excellent business plan and credit score. Banks and credit unions typically do not lend to cannabis-related businesses due to federal laws prohibiting lending money for illegal activities, making finding one to lend you money a daunting challenge.
Equipment Financing
Cannabis businesses require expensive equipment that specializes in growing cannabis. Unfortunately, securing financing through traditional lenders can be challenging due to federal law’s classification of marijuana as an illegal substance – leading lenders to avoid providing credit if there is evidence that violations were made of state laws.
Alternative lenders that specialize in marijuana equipment financing often differ from their traditional counterparts in that they can be more flexible when qualifying applicants, including pre-revenue startup cannabis businesses with lower credit scores or even those looking for prepayment terms and more flexible collateral requirements. These alternative lenders tend to require lower credit scores and can even work with those without revenue streams requiring prepayment terms or collateral requirements that meet stricter criteria.
When applying for marijuana equipment financing, your answers must be clear and honest. Any attempts at concealing or misrepresenting details could decrease the odds of approval and help ensure you secure the best financing deal available. It is advisable to compare different lenders before choosing one; this will help ensure you obtain optimal financing solutions.
Leasing cannabis equipment financing solutions is often an efficient choice, allowing you to spread out payments over an extended period with fixed monthly payments that won’t strain your bank account as much. Lease agreements usually last between two and ten years; when their term ends, you have two choices – purchase it outright from your lender or return it.
With Charter Capital’s expertise in helping small and midsized businesses obtain funding, securing marijuana manufacturing equipment financing can be simple and efficient. From equipment financing, working capital advances, and merchant cash advances – whatever you require, we have the perfect lender available for you! Reach out today and discover your funding options – we look forward to speaking to you!
Non-Dilutive Debt
Non-dilutive debt funding allows businesses to acquire capital without giving up equity in their company, which may be particularly useful for cannabis businesses that do not want to accept investors and want to expand while still controlling their own business. Non-dilutive debt funding comes in various forms, such as grant awards, revenue-based financing arrangements, venture debt investments, or angel investments – providing businesses with funding without giving away equity as part of the deal.
Researching all your options to select an ideal non-dilutive debt funding option for your business is critical in choosing an optimal non-dilutive debt funding strategy. Different forms of financing come with differing terms and conditions; it’s crucial that you fully comprehend their risks before making a decision based on them – some states require collateral while others have compliance regulations to meet. It is also vitally important to consider what amount you need and your growth objectives when making this choice.
Access to cash can be difficult for cannabis businesses and related companies just starting, particularly during their early stages. Entrepreneurs seeking fast capital solutions turn to non-dilutive debt financing, such as cannabis cash advances. Cannabis cash advances provide quick capital solutions that meet many business needs quickly.
Private equity can also provide non-dilutive debt financing solutions for cannabis companies, although it may be more challenging to acquire than debt financing. Private equity firms specialize in assessing cannabis company potential and can often offer valuable guidance to their clients.
As the cannabis industry develops, more non-dilutive financing options are available to licensed producers and pre-licensed applicants. These models can be beneficial for multi-state operators having difficulty raising large sums through traditional equity funding models, such as when, during the coronavirus pandemic, the federal Paycheck Protection Program allowed cannabis businesses to borrow up to 60% of payroll to cover employee wages as an example.
Business Loans
Cannabis business loans provide entrepreneurs with a great way to meet startup expenses, cash flow management needs, and one-time investments associated with a cannabis company. Unlike investors who may require involvement in daily operations or expect returns from their investment, business loans allow entrepreneurs to retain complete control of the company they’re running.
Traditional lenders have traditionally avoided working with cannabis-specific small businesses due to federal law’s view that marijuana remains illegal, fearing prosecution for handling funds belonging to an illegal drug. As more states legalize marijuana for medical and recreational use, traditional banks and lenders are becoming more willing to partner with cannabis-focused small businesses.
The New York City Economic Development Corporation (NYCEDC) is launching an $8 Million Cannabis NYC Loan Fund dedicated to licensed cannabis businesses in New York City. An RFP for capital partners and loan fund administrators to source, structure, close, and monitor loans has been issued by NYCEDC.
Investments for Your Cannabis Capital When seeking cannabis capital, having an effective business plan is crucial to its success. A comprehensive business plan should include your business model, market research results, financial projections, marketing strategy, and evidence that shows you understand its unique challenges.
An essential factor in securing cannabis capital is building up your credit. Make payments on time and reduce debt to boost your score; this could help ensure your more favorable loan terms and increase the chance that you’ll get approval for the funds you require.
How to Acquire a Cannabis Business Loan
Small Business Funding is one institution offering cannabis business loans and may approve your cannabis venture for financing even with poor credit. They offer merchant cash advances and lines of credit.
GoKapital offers online lenders who specialize in financing cannabis-related businesses the chance to get loans between $50,000 and $5 Million. You must qualify for at least four months in business with an established personal credit score of 500 or greater and annual sales exceeding $150,000.
