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How to Get Financing for A Cannabis Business?

mariaaleachFeb 17, 2020, 12:02:15 PM
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Business funding is metaphorically tough. No matter what niche you work in, federal financing for a business is an arduous task and turns out even more challenging when the word cannabis is laced with a business name.

Unlike other federal financings, financing for a cannabis business is a whole new ball-game. In a cannabis business, things can be a bit overwhelming. You can’t step into a bank and ask for a loan just like that.

But let’s be more realistic about the fact, cannabis has rapidly evolved from having a ‘not so good repute’ to one of the most wildly booming businesses globally.

Having that said. Still, there are a considerable number of federations not qualifying cannabis business for the certification of a federally legal drug. On the other hand, 11 states presently have approved cannabis officially licensed. According to research conducted back in the year 2017, unveils that the cannabis market has escalated by a massive number of 37% and has accelerated the legal trade of cannabis to an enormous sum of $ 10 million.

The cannabis market is anticipated to bud into a booming sector in the years ahead. However, there are lesser funding options available out there for a marijuana business; still, there are some viable options accessible to get funding for a marijuana business.

When financing for a cannabis business, you can often end up in hot water when other alternatives don’t fork out. But no need to panic. You can seek assistance from corporate funding options for a cannabis business.

Before we shed some light upon the way outs to get financing for a cannabis business, here are some obstacles that one might jump into while collecting funds for a marijuana business.

OBSTACLES FACED WHILE FUNDING FOR A MARIJUANA BUSINESS

Finding a lender then convincing them to lend you a significant sum of money for your cannabis business is not that simple. While doing so, one should make sure to look for the most affordable loan options. Done identifying the lender you plan to proceed with? If so, do the legal work (paperwork) and ensure that your business qualifies the eligibility criteria to get federal financing.

While things may appear smooth initially, but practically on the way to financing for a cannabis business, one is suspected of encountering a boatload of stumbling blocks.

A cannabis business brings in high-risks! Believe it or not, even opening an account for a marijuana business involves a lot of hassle and drama while borrowing loans from conventional lenders turn out to be beyond possible.

A STREAMLINED FINANCING FIX FOR A CANNABIS BUSINESS

Seeking for streamlined Cannabis Business Loans? Here’s what will lighten your load while financing for a cannabis business.

Well, cannabis business financing seems like a set with thorns; still, this arduous task is practically workable.

Going for alternative lenders can also ease up the tautness of hectic financing. Furthermore, opting for alternative lenders to get cannabis funding makes it even more simplified.

As these, lenders are not bound by the mainstream federal limitations; hence, funding from such sources can be beneficial.

In case you reside in a state where cannabis is recreationally permissible, then hitting this spot will help you in financing your cannabis business like a pro.

MERCHANT CASH ADVANCES

A payday credit or a cash advance loan is a form of credit borrowed for a short time. You pay some amount to borrow the cash irrespective of the duration for which you are borrowing money, no matter if it’s for a week or two.

A massive drawback of such funding is that payday finances or cash advance loans can often cost a fortune. So before you get one of such loans, consider other ways to borrow.

Although one can avail funding quickly through this procedure but a substantial drawback is, it has a massive rate of interest on low reimbursement terms.

A few merchant cash advances have fixed pay rates while others deduce a particular percentage of your transactions. When sales go up, your payment consequently gets higher. While if the sales show a declining number, your payments can get adversely affected.

The capitals from merchant cash advances can be used for a plethora of business commitments starting from the purchase of supplies, inventory, and equipment to serving as a source of working capital.

EQUIPMENT FINANCING

These loans are mostly to compensate for hardware expenses and expenses associated with the commute. Equipment financing lets you pay damages for the purchase of new equipment.

Commonly there are two types of equipment funding. In the first one, you only have to pay for 10 to 20% of the total expense, and the lender is supposed to bear the total cost for the equipment. In this kind of financing, you also get the perk of not even paying a single penny for the equipment purchased but that’s only in case you’ve good credit.

After getting hands on the equipment, you can pay for the installments at your convenience.

The second type is equipment lease, which requires down payment and grants you the authority to use the equipment during the lease period.

A significant downside of opting for the leased equipment is, you never enjoy the ownership of the equipment until you clear all the remaining dues.

LINES OF CREDIT

Inclined towards a flexible and manageable practice of financing? Go for Lines of Credit.

Here you won’t be getting a lump-sum payment. The lender will be liable for the finance management and also for setting goals and limits for your operational account.

In case you have financial instability, even then, you will be eligible for a lie of credit plan. This attribute makes it the most sought after option for start-ups. Moreover, the funds are super easy to access and get approved in a jiffy.

Right after you commence with it, the lender transfers the amount you applied for, handing over the right to use your funds as the next business day arrives.

Lines of credit also work well for entrepreneurs in urgent need for financing to meet their business needs. Be it covering operating expenses, hiring new employees or handling an emergency situation these funds can be used for many purposes.