Financing the Cannabis Industry

If the cannabis industry remains in hyperdrive—with some estimates positing the sector will top $30 billion this year—many eager entrepreneurs must face an uncomfortable hurdle: Finding cannabis financing remains a serious challenge to stability and growth.

If you’ve searched in vain for cannabusiness funding, we believe we can help. Bridge West CPAs are experts in the cannabis financial field, having helped over 600 clients since 2009. In today’s post, we’ll cover the landscape of cannabis business loans as it currently stands, plus recommend some potential funding options for those looking to enter the cannabis industry.

Ready? Let’s dive in.

Cannabusiness Funding: The Financial Landscape

If the cannabis industry were like any other, addressing the problem of fund-raising through debt would largely be status quo: Visit a financial institution and apply for a business loan. However, there are a number of complications facing cannabusinesses. The most pressing, of course, is cannabis’ continuing status as a Schedule I controlled substance. This means that ventures such as a cannabis dispensary can’t apply for loans backed by the Small Business Association.

Similarly, most banks won’t service cannabis ventures, although there are hopeful signs this is changing. While the SAFE Banking Act—which would allow and encourage banks to offer cannabusiness funding—has had a tortuous path to ratification, there are indications it may finally be lurching ahead.

Even without the SAFE Act enshrined in law, a number of forward-thinking financial institutions are cautiously offering cannabis financing.

“Over the past 12 months, we have seen more activity in the cannabis industry in terms of bank lending and business loans, financing, and funding,” said Cory Parnell, COO of Bridge West CPAs. “In the past, these transactions were only available to a limited number of cannabis companies. Now, there are more banking and financing options—plus opportunities for cannabis operators—than ever before.”

Please note: As with all matters pertaining to business funding, we urge you to perform thorough research and due diligence.

Diamond Business Loans

This financing company partners with established businesses and startups to provide a range of funding options, including unsecured capital, commercial real estate purchases, and equipment loans.

Dynamic Alternative Finance

With an exclusive focus on cannabis businesses, this Colorado-based company offers real estate, working capital, and bridge loans—as well as equipment leases. For amounts under $200,000, clients can typically apply online and gain pre-approval within 48 hours.

GoKapital

Another cannabis-specific financial institution, this lender works primarily with merchant cash advances ranging from $50,000 to $5 million. Prerequisites include at least four months in business, a good personal credit score, and annual sales of $150,000 or more.

GUD Capital

Self-described as “a leader in the commercial finance industry for small, medium, and large businesses,” this team of commercial loan specialists connects business owners with direct financing options. According to their website, cannabusiness funding options include private loans, real estate loans, equipment leasing, and cash advances.

Small Business Funding

Not to be confused with the aforementioned Small Business Association, this private lender offers many different options for traditional businesses whereas their cannabis dispensary and other cannabis-centric offerings revolve around merchant cash advances. Typically, applicants can receive a funding decision within 24 hours.

United Capital Source

Specializing in small business loans to dispensaries, this alternative lender offers a range of options from working capital loans to revenue-based business loans. Their website promises a 24-hour approval turnaround and funding within a few business days.

MediaJel Capital

MediaJel- a digital marketing platform which primarily focuses on successfully navigating cannabis SEO and the restrictions most states place on cannabis advertising-recently launched MediaJel Capital. Their goal: to provide a 24-hour turnaround on cannabis funding that enables applicants to incest in digital marketing and advertising solutions CIA flexible financing options in partnership with LendFlow.

Cannabis Financing: Alternative Options

Of course if a financial institution turns you down for a loan, there are alternate routes. One of the most popular is crowdfunding, an increasingly viable way to allow “micro-investors” to participate in your business. Currently, platforms such as Fundanna and CannaFundr are filling an important niche in the cannabis financing landscape.

Do you have further questions about cannabusiness funding? Don’t hesitate to reach out. Now well into our second decade of helping entrepreneurs enter the cannabis industry with financial services and advising, we’re confident that Bridge West CPAs can help set you on the road to success.

Cory Parnell, CPA, is the Chief Operating Officer of Bridge West LLC, CPAs & Advisors to the cannabis industry. For more information about cannabis financing or to schedule a confidential consultation, contact Cory at cparnell@bridgewestcpas.com or 651-287-6327.