CANNABIS INDUSTRY FINANCING
Business Financing Tailored to the Cannabis Industry
Your cannabis business needs access to capital to grow, open up new business lines and cash in on revenue generating opportunities.
Unlike big banks that won’t finance the cannabis industry, our lender network offers a variety of equipment, capital and real estate financing programs to be sure you get the funds you need, using the financing instrument that makes the most sense for your business.
Our large network of credit, revenue and asset based lenders will take the hassle out of finding the best financing option for you, and it doesn’t cost you a dime.
We’ll match you up with the best lending option that will provide top notch service with a range of financing options so you don’t get inundated with phone calls.
Get flexible cash for anything your business needs or financing for equipment, land or real estate. Whatever the need, we’ve got you covered with great incentives, flexible terms and a variety of repayment options.
Browse our financing programs to find the one that works for you or if you are ready, contact us for a free, no obligation consultation by filling out our short form. We are standing by and ready to serve!
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Cannabis Business Financing FAQ
Q: What options do I have for finding financing for my cannabis, hemp or CBD business?
A: Current options fall into a few general categories. Although there are a smattering of banks, credit unions and private equipment lenders the majority if financing comes from hedge funds, family office funds & private investors, hard money lenders, development companies, management companies and high net worth individuals.
Q: How do I qualify for cannabis financing?
A: Overall, funding sources look for the same things lenders in traditional industries are looking for. A Combination of revenue and net income that can service the debt, with personal guarantors that can service the debt with or absent company revenues, with collateral to back the deal up in the event the first two pillars fail.
You’ll need at least two of the three pillars to open some doors. Or if only one pillar is present, it would need to be incredibly strong. For example, a PG with enough income and cash reserves to stroke a check, but they prefer to finance. Or a $10MM in valuable collateral where you only need $1MM in financing against it. Or plenty of revenue and net income that demonstrates you can easily service the debt.
Almost every cannabis funding source will require a personal guarantor that can demonstrate they can back up the financing. IF your pillars of revenue, net income and collateral are strong you don’t always have to personally guarantee the financing. But if you don’t, it will affect your rate and term as well as close some doors that might be open otherwise.
Q: If banks and credit unions are lending to the cannabis industry, how come I can’t find them anywhere?
A: Most banks and credit unions did not start as pure cannabis lenders and are still regulated by the federal government. As traditional institutions move into the industry they are quiet about it and don’t really advertise. We have to find them via direct contact or through our network of partners.
Q: How does the Loanviser process work?
A: Unlike other services, we don’t think having you bombarded by phone calls and emails from many lenders at once is a great experience for anyone. As such, we review your information, determined what your best first option might be and match you with one option at a time. If the first option doesn’t pan out, we continue to match you up with one option at a time until all are exhausted. Please note that new partners join our network every month so options are always expanding.
Q: What do I need to get qualified for financing for my cannabis, hemp or CBD based business?
A: It depends on the type and amount of financing you are looking for. You can use the following information as a general guideline. Programs usually require a personal guarantor but not in every situation.
- Non-secured cannabis loans: You need a minimum of 6 months time in business, 3 months of bank statements and $12,000 per month in revenue.
- Cannabis equipment financing: You need a minimum of 6 months time in business, 3 to 6 months of bank statements and above average credit.
- Real estate financing: You need a minimum of 6 months time in business, 3-6 months of bank statements, above average credit and the loan to value must be 65% or lower.
Q: What type of documents will I need to apply for financing?
A: Required documents vary depending on the type of financing your company is seeking. For a list of the documents related to your request, along with helpful templates you can download, visit our Cannabis Financing Documents & Templates page. Also, our partners may require that you fill out their official application if they are interested in funding your project.
Q: We are a pre-revenue startup in need of financing. Can you help?
A: Sometimes. We do have partners that will look at startups. But you will still need to have a combination of personal guarantors and collateral that demonstrates your ability to service and securitize the debt being requested.
Q: Do you work with brokers or just direct lenders?
A: Our partner network includes both direct lenders and brokers. If you are a broker that needs help financing your clients we are happy to help. If you are a broker with cannabis lenders and would like to join our partner network, contact us today to get the conversation started.
Have a question that you don’t see here? Contact us about cannabis business financing and we’ll get you the answers you are looking for!
Bank, Credit Union & Private Equipment Lender Financing
There are a smattering of credit unions, banks and private equipment lenders financing the cannabis industry. However, they tend to be very selective in what they fund and where they will fund.
For example, if you are in California, have at least 2 years in business and net income that demonstrates it can service the requested debt, there is a bank that will fund commercial cannabis real estate transactions at rates starting at 4.5% with 3, 5, 7 and 10 year terms on a 30 year amortization. If you are outside of that criteria or need equipment, they can’t help.
Cannabis Businesses Looking at Real Estate Purchases
If you are a cannabis business looking at a real estate purchase and the building will be owner occupied, there are credit unions that may provide financing. However, they don’t do ground up construction and terms can cap out at 3 years in most cases.
Private equipment lenders can provide financing for cannabis equipment. However, what they will finance varies greatly. Some cannabis equipment lenders like lighting, some don’t. Some view HVAC as equipment, some as a building improvement. None really like low value equipment with non-durable value and small secondary markets. Irrigation and fertigation equipment, fencing and rolling trays are some examples.
There are paths available, but the details of the transaction and the borrower have to fit tightly with their preferences and requirements.
FICO Based Cannabis Financing
For small cannabis financing requests around $400K and under, there are FICO based programs available. They are based on an individual’s credit score, income, debt to income and debt utilization ratios. If you have at minimum of a 680 credit score, can demonstrate sufficient income, a monthly debt to income ratio of 40% or less and a debt utilization ratio of 20% or less you might qualify for the programs.
The line of credit option is a series of lines with 0% interest for 12-18 months, but credit card type rates afterwards. Applicants can be approved for up to $350K and multiple owners can apply. There is a 9.9% origination fee on the back end, paid out by the funds you receive.
The term option cannabis financing rates range from 7.5% to 14% and repayment terms range from 5-7 years. Applicants can be approved for up to $200K per and multiple owners can apply. This also has the 9.9% origination fee on the back end.
These can be used in combination as well, and are great for smaller dollar asks and can be faster than other financing. Pre-qualification can happen in 1-2 business days with funding in 5-10 business days.
Hedge Funds, Family Office Funds & Private Investor Funds
These sources of cannabis industry financing are the closest to what would be considered traditional debt financing. They provide equipment and real estate financing as well as unsecured capital.
Cannabis equipment financing caps out at around 75% LTV on average. Although programs may be advertised starting at 8%-10% for grade A paper, 12% is truly the average. I’ve seen a little lower and I’ve seen much higher. Terms are 3 years on average with some extensions and longer in some cases.
Where equipment gets interesting is that some lenders like lighting and some don’t. Some consider HVAC a building improvement, some consider it equipment. No one loves fertigation and irrigation equipment due to the difficulty in extracting it, its non-durable value and small secondary market. Rolling trays and low value equipment are also not desirable but can be funded if small part of a larger request. The easiest cannabis equipment to finance is any that is easy to repossess, has durable value and a large secondary liquidation market.
Cannabis real estate financing caps out around 65% LTV on average, with rate ranges similar to equipment. Terms are 5 years on average and usually interest only, although structures vary and are sometimes negotiable. Sources vary on whether they will finance land, building renovations and ground up construction.
One important issue to note is valuations. We always recommend getting a commercial and cannabis use appraisal on your building or renovation/construction plans. Lenders generally use the commercial value, but if they are close, there may be some room for negotiation. However, if your cannabis real estate is appraised at $1MM commercial use and $5MM cannabis use, you can bet on it being valued at the $1MM to the lenders.
When it comes to cannabis real estate as collateral, brick and mortar rules, metal and concrete is ok but plastic and metal structures are generally not great collateral. Location also matters, the closer to an urban area the more desirable it becomes. Lenders don’t want to own a piece of property in the middle of nowhere if things go bad.
Unsecured capital for cannabis companies is usually based on revenue or a combination of revenue, POs and strength of personal guarantors. Rates can range from 15% to 40% and terms are generally 90 days to 18 months. It is the most expensive short term money where the opportunity needs to outweigh the cost of capital for it to make sense.
Cannabis Real Estate Investors
Real estate investors that are generally agnostic about cannabis and are instead real estate motivated. For the right property in the right location at the right LTV, they have made 50% LTV offers to startups and 65% LTV offers to cash flowing companies. Some even offer 10 year interest only terms but the money is expensive. Expect 15%+ with 6-9 points charged on the deal.
Real Estate Development Companies
Real estate development companies operate in the space, but only take on around 8-10 projects per year. The offerings from this segment land somewhere between debt financing and equity investment firms.
They provide a fee for service, helping to get all the construction plans and contractors in place. They have long term relationships with investors that work with them, investing in their projects as trusted partners. As with equity investment firms, funds are not guaranteed but they do not tend to take on projects they don’t feel their investors would be interested in.
Real Estate Management Companies
Real estate management companies operate in the cannabis space but as permanent landlords. If they are interested in your project, they may buy the land, construct or renovate a building and in some cases put all the equipment into place. Then you usually have an initial 15 year lease term with option to renew or renegotiate thereafter, however, there is never an option to repurchase the property.
The downside is you will never own the real estate or be able to leverage it. The upside is you have one lease payment, what equates to an initial 15 year term, get to let them handle the initial capital outlay and can reinvest more revenue back into your company. This is a model companies like CuraLeaf are using to preserve and leverage their capital, as well as disconnect the business from the real estate to mitigate risk.
High Net Worth Individuals
High net worth individuals also lend into the cannabis industry. This is not exactly like traditional debt financing but is akin to it. To open up this door you would need a minimum of $5MM dollars, have 20% of the requested funds in liquid cash and 50% of the ask in collateral.
If you qualify, there would be a hand off to our partner that has built relationships with high net worth individuals. They will work to match you up with individual sources of capital interested in your project to negotiate a deal.
This path also offers the advantages of relationships that are interested in your long term success. Where starting rates and terms might be more attractive depending on your project and the risk involved.
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