25 states in the US have already made the cannabis industry legal either for medical or recreational purposes. However, it is still illegal on the national level. Raising enough funds to start your own business is not that easy.
Big Players and the Right Investments
When it comes to major players in the field, they want to see how state and local corporations come into play. Microsoft has recently become the 1st major company to announce its participation in the sector and partnered with Kind Financial. The latter helps businesses and government agencies track sales of legalized marijuana.
According to the Marijuana Business Association, if you want to start a cannabis business in the US, you should invest more than $1m. Licensing fees, rent, and equipment costs often require the biggest charges and costs, depending on states as different states have different regulations.
Investors consider finding the right business is often the most challenging part. According to Christopher Milenkevich of Gotham Cannabis Associates, tax issues, licensing, and cash management are the important issues the investors are interested in and will ask questions about them. Many banks will refuse to open an account for marijuana businesses because the bank could put at risk its federal charter.
According to Rob Hunt of Tuatara Capital, one should have enough knowledge to increase legitimate investments. He started in the cannabis industry in 2007, running and selling his company Rocky Mountain Hydroponics.
In 2014, the company owner joined forces with 3 Wall Street veterans and established Tuatara to capitalize on the industry’s in need for funding. According to Mr. Hunt, the business took advantage of the absence of big players such as pension funds. When the laws are changed to allow those players in, Tuatara will be able to sell its shares for large profits.
Marijuana Loan Provider First American Merchant or FAM offers the lowest-possible rates in the industry and exceptional high risk merchant accounts to businesses of any type and size. FirstAmericanMerchant.com provides business funding options to merchants of any type and size.
Steven Trenk owns a company called Lizada Capital invests in 35 cannabis companies. As he mentions, when searching for an investment, it is important to focus on the management. This is a brand new market in every respect and you should look for those who can deal with it.
Even at the state level, regulation can make investing of challenge. Both in Colorado and Washington, cannabis is fully legal with residency requirements for investors. If you are trying to own part of a cannabis company in Washington, you must live in the state for 6 months and you must be a resident for 2 years in Colorado.
As for loans, it can be granted no matter where you live. Loans enable companies to keep ownership, as Scott Jordan of Dynamic Alternative says. If you lack commercial credit, you can try opportunities for private lenders in the cannabis industry.