4 Ways to Secure Funding for Your Cannabis Business Startup
The cannabis industry is literally ablaze with momentum and projected profitability for businesses that operate within it. Forbes states that worldwide cannabis spending will top $57 billion by 2027. Without a doubt, it is an excellent time to enter this lucrative, evergreen market.
However, because cannabis laws vary greatly between different states, obtaining startup capital can be challenging. That's mainly because marijuana remains a controlled, illegal substance on a federal level in the USA. That means that that the FDIC will not insure traditional bank loans for this type of "high-risk" business.
So, what are the available financing options for budding entrepreneurs who are trying to gain entry into this market? Many people are pleasantly surprised to learn that there are various funding sources geared especially for this type of venture.
However, because cannabis laws vary greatly between different states, obtaining startup capital can be challenging. That's mainly because marijuana remains a controlled, illegal substance on a federal level in the USA. That means that that the FDIC will not insure traditional bank loans for this type of "high-risk" business.
So, what are the available financing options for budding entrepreneurs who are trying to gain entry into this market? Many people are pleasantly surprised to learn that there are various funding sources geared especially for this type of venture.
The following are 4 of the best ways to get your cannabis business funded and growing. Each has different requirements concerning your credit score, revenue, profitability, credit card volume, and other factors.
#1: SBA Loans
The Small Business Administrationis a branch of the US government. Its purpose is to provide funding for small businesses, which are considered the backbone of the American economy. In order to obtain an SBA loan, you're going to need:
● At least 2 years in business
● A credit score of 640 or above
● Minimum annual revenue of $50,000
● No bankruptcy within the past 3 years
#2: Credit Lines
Lines of credit are versatile, easy to apply for, and available whenever you need capital to help your cannabis business grow. The basic requirements needed to obtain this type of financing are:
● Proof of profitability
● At least 1 year in business
● A minimum credit score of 600
● At least $200,000 in annual revenue
● No bankruptcy within the past 2 years
#3: Invoice Financing
Also called accounts receivable financing, invoice financing provides short-term loans based on money already owed to you by your customers. Companies that offer this type of financing will typically loan up to 85% of your invoiced amounts and the remaining 15% is reserved for repayment fees, which vary on case-by-case bases. Minimum requirements include:
● At least 6 months in business
● A minimum credit score of 500
● Annual revenue of at least $50,000
#4: Startup Loans
A new cannabis business venture can benefit greatly from a startup loan, which generally is either an equipment loan, a line of credit, or a combination of both. They are typically interest-free for up to 15 months and allow young dispensaries or other marijuana businesses to grow without being hampered by interest payments.
This type of loan does not depend on your time in business, annual revenue, profitability, accounts receivable, or credit card volume. It does, however, require a credit score of at least 700.
References
Forbes - Legal Cannabis Industry Poised For Big Growth, In North America And Around The World
Grand View Research - Legal Marijuana Market Worth $146.4 Billion by 2025 | CAGR: 34.6%
Funding is the most important piece in any successful business plan
Our cannabis funding specialists can help you determine your eligibility to qualify for capital. No risk to you, it will not hurt your credit, and we can give you a same day approval.
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