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Taxes Can Lead to the Need of Marijuana Business Funding

Businesses need funding at different times, and for different reasons. From rising rent costs, to seasonal employees, and new inventory, there are “normal” and mainstream issues in which a merchant needs funding. However, for those in the marijuana industry, one of the biggest issues that is pushing the need for funding is the “taxes” that hit the companies. This tax, per se, is actually a fee charged by the Massachusetts Department of Health, and it’s wreaking havoc on businesses.

Since voters in 2012 approved legislation allowing marijuana to be grown and sold to treat certain medical conditions, just six dispensaries have opened their doors. Another 174 applications are slowly advancing through the regulatory gantlet. One of the state’s applicants secured an approval letter from Worcester officials only after striking a deal that calls for Good Chemistry to give the city $450,000 over three years, and then dole out $200,000 — plus 2.5 percent of its revenue — in subsequent years. A $10,000 annual contribution to public charities was thrown in for good measure. This seems like bribery, no? Well, some are viewing it as such.

Not all small businesses can afford this; heck, most cannot. This is where the search for funding for a marijuana dispensary comes in. Funding sources are few, and with the “high risk” nature of the business, those few options can trickle down even further.

So, what do you do? There are funding options that can help you get the funds needed to pay the state’s “tax”. However, some that work for your business have their own littles catches. Crowdfunding sites are popular, and for a high risk business they are one of the best options. However, the cash flow isn’t guaranteed, and each site takes a portion of funds that are raised. Some sites also require you to give something away for a certain donation amount – and for a pot dispensary, this can be tricky. Funding from your mortgage is also an option, but payments will rise after a certain period of time and you must repay or risk foreclosure. A merchant cash advance from a merchant account provider is a better option, and services vary depending on your length of time in business and whether or not you have a merchant account or a regular business checking account.

Massachusetts is just one of the states implementing a “tax” of sorts for their new marijuana dispensaries. This can seem unfair – and to those who cannot afford the funds, it is. Check with your merchant account provider to learn of your funding options to better your business quickly.