You're about to embark on opening up a cannabis business. Or perhaps your existing cannabis business is experiencing remarkable success – it's time to grow, expand, and meet your booming demand. For most companies, the solution is simple: go to the bank and get a loan. On the other hand, cannabis business loans, and more broadly, cannabis business funding, isn't so easy to find.In fact, despite record success in all the states where cannabis is legalized, major banks and financial institutions simply won't lend to any business connected to the cannabis industry. Cannabis business funding still exists, though. After all, few, if any, businesses could grow without cannabis business loans.In this article, we'll explain why you're having so much trouble finding a cannabis business loan. We'll also give you some solid tips on finding cannabis business funding. So, your business can keep growing to meet your demand. Why are cannabis business loans so hard to find?If you think it's hard to find cannabis business funding today, it's never been easier. Since the earliest days, Safe Harbor has been at the forefront of cannabis banking, back when any cannabis-related business hoping to grow had little to no cannabis business funding options. Why the difficulty?The answer is simple – federal and state legislators disagree on cannabis legality. Marijuana businesses can flourish because states have legalized marijuana – either medically or recreationally. In contrast, federally, marijuana remains a Schedule I drug, meaning banking institutions must investigate businesses suspected of being involved in money laundering activities for illegal substances under the Bank Secrecy Act of 1970.The solution, pioneered by ourselves and other financial institutions, was a patchwork of locally-based organizations offering loans and other financial services to the growing number of marijuana businesses.Can I use traditional lenders for cannabis business funding?Because of the federal legality of cannabis, you cannot use traditional means to secure funding. Even credit cards are forbidden to cannabis businesses, and such transactions can bring unwanted attention to your business.You can always attempt to secure a loan through a traditional lender, such as remortgaging your home. However, you should always be above board regarding the purpose of your loan. Any mistruth or hidden details will only affect your business's success and legal status.What are the cannabis business funding options?Without traditional means to access funding, cannabis-related businesses rely on a new and growing industry of cannabis-dedicated financial institutions.However, it's not the only funding option available. There are several other potential funding sources worth considering:
- Private investment. Given the lucrative nature of the cannabis industry, there's a growing cadre of investors looking to boost their fortune. They'll offer businesses a deal in exchange for cash. The arrangement can vary depending on the investor. In some cases, they may require you to give up equity in your businesses – though this is not always the case.
- Crowdfunding. Are you the first dispensary in your area? Do you have an innovative cannabis product? If you've got a hook to get regular people to invest, crowdfunding is one potential funding option. It also comes without many of the standard strings associated with other financial options.
- Personal loans. As mentioned, you can always get a personal loan. However, few financial institutions will provide you with the money if it's going towards a cannabis-related business.
You should always consider all your options. Nevertheless, securing a reliable cannabis business loan from a reputable financial institution will always be preferable to many options above. What factors determine the success of cannabis business loan applications?All cannabis financial institutions will have their own criteria borrowers must fulfill to qualify for a loan. Some will be more stringent than others. It's all due to the high-risk nature of the business, which affects the interest rate and size of the loan borrowers can apply for. The most common factors that determine success include:
- Good personal credit history. Your credit score and other aspects of your financial history will always affect your loan application. Typically, the lower threshold for credit scores is between 550 to 650.
- Financial reliability. Banks will be looking for businesses (and individuals) with a history of timely payments and responsible financial behavior besides bankruptcies.
- History of bankruptcies. Bankruptcies are the hallmark of poor financial behavior. However, no financial institution will penalize someone forever. Typically, the absence of bankruptcies in the previous 5 to 10 years is a good indicator of financial responsibility – and is often the minimum requirement to qualify for a loan.
Regardless of these criteria, certain financial institutions will offer some form of funding. Beware of some of these institutions. Yes, they may fund you despite a credit score of 400. However, this often comes at other costs – like high annual revenue requirements or needing to have been open for several years.How to access cannabis business loans through Safe HarborOur cannabis business loans program is simple and straightforward. We offer cannabis loans exclusively for clients who've been with Safe Harbor for a minimum of six months. All of our business loans are related to property.We provide four types of loans:
- Purchase a commercial property (for manufacturing, retail and/or distribution)
- Refinance an existing commercial real estate loan
- Cash-out on an existing commercial property
- Mortgages for cannabis business owners
If you're interested in applying for a loan, please submit a loan application. We require a number of essential documents and information, including:
- All business documents and relevant information
- Tax ID Number
- A brief description of the use of funds
- Business license
- Type of loan needed
- Personal credit history