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How to Secure Funding for Your Cannabis Business

cannabis loans
Written by Alexandra Hicks

The cannabis industry has for the last 3 years been one of the fastest growing industries in the United States, and the entire world. It’s hard to get an exact number because every region uses slightly different metrics, but at a base level, the global weed market has a current estimated value of over $21 billion and is projected to reach over $90 billion in the next 5 years.

In the face of all this growth, there is still a glaring shortage of economic options to help businesses expand and meet their full potentials, especially those smaller companies that don’t have a lot starting capital. Due to strict federal regulations in nearly every country on earth, most financial institutions are unwilling to work canna-business owners, despite the unmatched potential of these operations.

Cannabis is amazing, but when it comes to the business side of things, it’s one undeniably complicated industry. Whether it’s about banking restrictions, local ordinances and regulations, obtaining a loan, or any other cannabusiness-related concerns, stay ahead of the curve by subscribing to The Delta 8 Weekly Newsletter, where you can find more articles like this and exclusive deals on flowers, vapes, edibles, and other products. Also save big on Delta 8Delta 9 THCDelta-10THCOTHCVTHCP & HHC products by checking out our “Best-of” lists!


Financing obstacles and why it all matters

A successful cannabis business can be wildly profitable, but operation costs are insanely high, and again, most businesses are unable to obtain loans via any traditional channels. Because it’s still federally prohibited, banks are not even willing to provide so much as a checking account to canna-business license holders, so you can imagine how challenging it is to try and get financing like loans or credit cards: nearly impossible.  

Getting money from private investors may seem like a more promising option but can be similarly frustrating. Equity or stock funds are also severely restricted – because for various reasons be it legal, social, situational, or a combination of the three, most investors tend to shy away from marijuana. Those who do consider it, often face pushback because of the plant’s illegal status.

Even at peak times to invest, and even for low-risk and ancillary businesses, the fact that they are working in cannabis means these business owners will pay upwards of 25% APR for loans, compared to equally risky non-cannabis businesses who would pay roughly 6-7% for their own financing.    

The ability to secure capital is a major stepping-stone for businesses of all ages and sizes, but especially smaller operators and startups who jump into the game with incredible products but very little initial funding. Unfortunately, most financial institutions won’t work with start-ups anyway because they have no track record of sales or receivables. One of those annoying catch 22’s, like when you’re fresh out of college but can’t find a job because no one will hire a person without experience.

This may seem like it’s only an inconvenience for borrowers, but it can actually be a huge pain for lenders as well. Think of all the gold mine companies they have to turn away because they’re scared to get screwed over by changing federal regulations. Many companies would make enormous profits by lending to cannabis business owners, but this is a door they have to keep closed for now.  

What are the most common uses for cannabis business loans?

  • Working Capital   
  • Equipment Financing
  • Business Expansion        
  • Cannabis Biotechnology         
  • Cultivation, Growing and Farming        
  • Hemp & CBD Products·        
  • Marijuana Product Expansion·        
  • Marketing & Business Development
  • Commercial Real Estate Financing
  • AR/Invoice Line of Credit

Secured vs. unsecured financing

Different companies have different requirements when it comes to providing secured loans versus unsecured loans, and many don’t offer both, but it’s a talking point worth covering briefly, just for reference.

Secured loans require the borrower to back up the money with some type of collateral, which is usually a car or home on the most common types of secured loans which are auto or mortgages, but anything of value that you own can be put up as collateral in some situations. When you take out a secured loan, the lender puts a lien on whatever asset you use for collateral, then once the loan is paid off the lender removes the lien and you now have full ownership over both assets. If you default on your loan, the lender will take your collateral as payment instead.

According to Experian the most common types of assets used for collateral are as follows: “Real estate, Bank accounts (checking accounts, savings accounts, CDs and money market accounts), Vehicles (cars, trucks, SUVs, motorcycles, boats, etc.), Stocks, mutual funds or bond investments, Insurance policies, including life insurance, High-end collectibles and other valuables (precious metals, antiques, etc.).”

Unsecured loans, on the other hand, do not require any collateral and thus are less risky and much more popular than secured loans; although credit requirements are often stricter for unsecured loans. And you will still be on the hook for interest and fees that vary based on your credit score, and often at higher rates than with a secured loan. Personal loans, student loans, and credit cards are some of the most common types of unsecured loans.

Lenders and resources

Although limited, some financial resources for the industry do exist. Below are a few companies that I have spoken to personally who offer various types of loans and other services for cannabis business owners.

  • Cannabusiness Resources – Cannabusiness Resources is a financial service company that aims to provide loans and lines of credit, accounting and banking options, and processing solutions to the entire cannabis industry, both marijuana and hemp/CBD businesses, as well as ancillary companies.
  • Advance Point – AdvancePoint offers cannabis business funding, cash advance, invoice financing, and purchase order financing. Basically, they provide everything except start-up business financing. According to customers, they enjoy “the fast, streamlined process and high approval rates.”
  • Diamond Business Loans – DBL operates as a direct lender, syndicate, and brokerage firm. They offer loans for a variety of different needs including new equipment financing, accounts receivable and invoicing, working capital, or for the acquisition of a new company. They work with everyone, from startup companies to well-established businesses and everyone in between.
  • Good Tree Capital – Good Tree Capital is a FinTech firm that provides numerous different cannabis-related financial services to borrowers and accredited investors. One of their main objectives is to make completely fair and unbiased lending decisions and “distribute fund equitably” using their innovative technology. Their mission is to “provide fair access to capital for all.”
  • Bespoke Financial – Bespoke offers a wide array of short-term cannabis loans including invoice financing, line of credit options, and inventory financing. Bespoke works with many different levels of cannabis industry professionals including those working with marijuana or hemp, CBD, and other cannabinoids.
  • Seed to Sale Funding – Seed to Sale works closely with a large network of private funding sources such as investors, family offices, private lenders, and hard money lenders. According to their website, they have raised over $45 million in loans since 2019.

Final thoughts on cannabis business loans

All businesses strive to be successful and profitable, and after a few years of initial struggles, up-and-downs, and stretching budgets, it’s expected that your net profits can then be reinvested into the business. But until you reach that point of sustainability, it’s nice to know that a growing number of lenders are willing to work with cannabis companies by offering much needed financial services that have been out of reach for the industry until now.

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About the author

Alexandra Hicks

Managing editor at Cannadelics and U.S based journalist, helping spread the word about the many benefits of using cannabis and psychedelics.