Cannabis is becoming a more prevalent commodity in the U.S., and more and more businesses are applying for state licenses with hopes to open their gates. Entrepreneurs looking to create new ideas and find a specific niche have plenty of opportunity as more states began to regulate cannabis.
But it won’t be an easy road for the cannabis entrepreneur — they’ll need to raise capital and that is easier said than done when it comes to cannabis. Federal prohibition and scheduling of cannabis has made banking and financial regulations murky around state-legal operations, though the decline in banks working with cannabis businesses has now stabilized. Many basic financial services such as bank loans are not available. There are other options to raise the funding you’ll need.
Where to Get Cannabis Business Loans
1. Find investors
This multi-billion dollar industry is growing quickly, and there are private investors who are eager to find the right project to back. Some are venture capitalists who want a piece of equity; others are angel investors who typically offer less money total but with fewer strings attached.
How do you meet investors? Cannabis business directories online and in print in some localities are a great resource to start. You can also reach out through social media if you find the right places. Look for investor groups on LinkedIn and Facebook for potential investors for your business. Another way to meet investors is to attend cannabis conferences and other events; this gives you a chance to meet in person so you’ll need to have your pitch and plan prepared in advance.
Why have just one or two investors when you could have hundreds or thousands of investors without giving up equity in the company? Crowdfunding makes that possible. Cannabis isn’t welcome on all fundraising platforms, but sites like CannaFund and Fundanna are great for startups. You can offer perks such as free merchandise, products, or other special offers to entice would-be investors.
3. Personal loans
Startups without a financial history have an especially hard time finding funding, but if you as an individual have good credit, a personal loan may be the way to go. Be honest with your banker about how the funds will be used. If it’s a problem in the beginning, it will also be a problem later! You can also consider asking family and friends for personal loans or contributions to your project.
4. Wait and hope for the SAFE Banking Act to pass
The Secure and Fair Enforcement (SAFE) Banking Act is a bill that would clear up the financial uncertainties caused by cannabis being federally illegal but also a state legal plant. Banks and cannabis businesses alike are waiting with baited breath as to whether Congress will take on this proposed bill.
5. Go into CBD instead
As a last resort, you can switch your focus from other cannabinoids to CBD. It might not seem as glamorous to some, but hemp-derived CBD has gained more federal acceptance. CBD-related businesses are more able to obtain traditional banking services.
Finding a loan to get started is difficult, especially as a cannabis-related business, but it is possible. It may take some creativity, networking, or patience, but you can get there.
Tell us about your experiences with these different kinds of investors in the comments.