It’s true. Legal-marijuana businesses have a very hard time raising the money they need to start and grow their business. Even though states are pushing hard to legalize cannabis, it remains very much illegal at the federal level. As a result, big banks won’t risk lending them capital or opening a merchant account.
Where are Marijuana Dispensaries Finding Financial Help?
With a growing number of marijuana companies, help is obviously coming from somewhere. Many entrepreneurs choose or are forced to self-fund from personal savings or business profits. Scott Jordan, director of business development for Colorado-based Dynamic Alternative Finance, says that small business owners typically take out a home equity line of credit, use their credit cards or borrow funds from friends and family.
There are some small banks that are willing to work with cannabis companies. For example, in Colorado, there are (at least) eight banks and one credit union that are actively taking deposits. Others seek money from those who are more than happy to work with the marijuana industry: high risk specialists.
What You Need to Know about Lenders and Investors
Debt-based lenders are focused on what is known as the five C’s: credit score, character, capacity to repay, cash-flow and collateral. Jordan says it is important for cannabis companies to maintain a strong credit rating and keep excellent financial records. He also cautions business owners to go above and beyond in both ethics and honesty. Lenders and investors will shy away if any shortcuts are made and any issues are present.
Equity investors, on the other hand, will require a more formal pitch. They are going to want to know about your team, the product or service, the market size, competition, etc. Investors will be providing funds based on the potential and future expansion of the business. They will also seek a larger return on their investment than a debt provider.
Jordan, whose firm helps cannabis companies find the funds they need to start or expand, believes there will be more options available to the industry in the future. “We’re seeing some lenders that are looking for higher yields and returns, venturing into this space,” he said. “In terms of equity, we also are seeing some of the larger hedge funds and other family offices.”
Fast and Flexible Marijuana Dispensary Funding
Many marijuana merchants need immediate cash to cover costs and other needs. They simply do not have time to wait for debt-based lenders or equity investors to agree to fund them. Traditional financing can take weeks or even months for businesses to hear whether they have been approved or not. During that time, the business’ needs have only grown, and opportunities have been missed.
For this reason, cannabis companies are turning to alternative providers like First American Merchant. As a high-risk specialist, FAM understands the needs of the marijuana industry and offer services that are tailored to meet these business’ specific needs. With FAM, marijuana merchants can expect:
- Credit Scores Below 500 Approved
- Receive your Funds within 72 Hours
- Simple, flexible programs
- No tax returns or financials required
- Fast Application Process
If you would like to learn more about marijuana dispensary funding, contact our team of experts today. The application takes just minutes to complete, and you will hear back in as little as 24 hours.