Budgeting and Financing Your Cannabis Adventure
Finding Startup Funds for a Marijuana Business isn’t Always Easy
Banks don’t like to provide loans for businesses in the marijuana industry, especially for businesses that work directly with the plant itself, like grow facilities. This is because marijuana is still federally illegal, and banks that take on existential risks — like lending money to a company that’s in violation of federal law — could lead to losing insurance from the FDIC. Some business owners can finance their operations through personal savings, profits, credit cards or lines of credit, but most new companies have to turn elsewhere to find the funds they need. So how can you get the startup funds for your cannabis grow business if you can’t turn to a bank?
Find the Financing You Need with a Private Investor
Until cannabis becomes federally legal, and banks start lending to cannabis startups, private investors have stepped in to help new businesses find the funding they need. These private investors include venture capitalists, angel investors, private equity funds, cannabis business consulting firms and private lenders.
Debt-Based Lenders vs Equity Investors
There are basically two types of private investors who fund startup cannabis businesses — debt-based lenders and equity investors. Debt-based lenders are a lot like traditional banks, in that they look at the five Cs (character, credit score, cash flow, capacity to repay and collateral) when making credit decisions. Equity investors, on the other hand, will expect a more formal pitch that includes information about your team, the market size, your competition, your product, etc.
What You Need to Secure a Loan from a Private Investor
While the terms and restrictions of the application process will vary from loan to loan and lender to lender, there are a few general requirements that any cannabis business looking for a loan will need to meet. In order to qualify for a loan, your business must:
- Be incorporated.
- Have a banking account set up under the business name.
- Have been in business for a minimum of six months.
- Have a credit score of 500 or higher.
- Have monthly sales that gross at least $10,000.
Getting the startup funds you need is just one of the many steps of setting up a successful marijuana grow operation. You also need to find the right marijuana property to invest in, and that’s where we come in. Our cannabis property for sale in Needles has everything you need for a successful cultivation business, including 359,500 square feet of buildings! Contact us today to learn more.