Business Loans and Lending in Cannabis, Hemp, and CBD Industries

Business Loans and Lending in Cannabis, Hemp, and CBD Industries
Business loans and other lending options provide companies like cannabis and hemp farms and dispensaries with the finance they need to develop their organization. These type of loans also suit cannabis companies who have recently experienced a financial emergency and want to cover a shortfall in funds.

The legal cannabis industry generated billions of dollars in sales in 2017, and experts predict this number could rise in 2018. As the sector grows, more companies are looking for finance options from banks and other lenders.

Which Lenders Provide Cannabis Companies With Finance?

Despite the growth of the legal cannabis industry in recent years, some lenders are still reluctant to provide cannabis and hemp companies with finance. Traditionally, cannabis and hemp farmers raised funds from family and friends or secured seed capital or crowdfunding investment from other companies. In 2016, the Securities Exchange Commission introduced regulations on cannabis-related crowdfunding operations.

In 2018, the U.S. Small Business Administration (SBA) introduced new lending rules for the cannabis and hemp industry. These new regulations could prohibit cannabis companies from applying for SBA-backed loans.

Currently, farmers and dispensary owners have limited options when it comes to taking out a loan. However, this could change in the next few years as the cannabis sector becomes more profitable. Research shows that the legal cannabis market in the United States will hit $25 billion by the year 2025, according to analytics firm New Frontier Data

Still, business owners have various financing options to choose from, including short-term loans and longer-term lending options. Short-term loans tend to come with higher interest rates; however, borrowers usually receive funds in a quick timeframe. These funds can cover the costs of property, equipment, and inventory on a cannabis or hemp farm or help cannabis companies expand their business. Borrowers might need to secure funds in order to maintain a grow house.

Other loan options include:

  • Working capital loans: These unsecured loans provide cannabis companies with the funds they need to hire and manage staff and carry out day-to-day business tasks.
  • Real estate loans: These secured loans let cannabis companies use real estate as collateral for a loan. The amount a business owner can borrow will vary depending on the lender, but real estate loans could be worth hundreds of thousands of dollars or more.
  • Dispensary Cash Advance: This lending option provides cannabis companies with the funds they need to support their inventory and purchase new equipment. Borrowers will receive a cash advance and have to pay this back at a later date.

Borrowers can compare different lending options by using a loan comparison tool. Here, business owners can view various financial products in one place and choose the right loan based on their budget and individual circumstances.

Which Cannabis Companies are Eligible for a Loan?

Different financial institutions have different criteria when assessing borrowers for eligibility. Typically, cannabis companies need to be in operation for at least six months before they can secure finance. (They might be incorporated as an S corporation, limited company, or LLC). These companies will need to have a good credit score, too. Business owners who have a good credit rating will be able to apply for loans with low interest rates and more flexible repayment terms. Business owners who have a poor credit rating, however, will have to apply for loans with higher interest rates and will have less choice. Cannabis business owners should always check their credit rating before they apply for a loan. This way, they can check previous financial commitments and apply for a product based on their financial history. Other eligibility requirements include a solid business plan and no criminal record.

What Should Borrowers Look for When Taking Out a Loan?

Borrowers will need to consider a number of factors before taking out a cannabis and hemp loan. Ultimately, business owners should choose a loan provider who offers good value for money and low interest rates. This will make the loan more affordable in the long run. Business owners should also choose a company that has a number of communication options (phone, email, live chat, etc.), which will make it easier when discussing the terms of the loan or making repayments.

Borrowers should also check out the repayment terms on a loan. Usually, business owners will need to repay their loan on a monthly basis. Late payments, however, could result in additional fees. Lenders will penalize borrowers who are unable to keep to the terms of their cannabis loan and can report late payments to one of the three credit reference bureaus in the U.S.: Equifax, Experian, and TransUnion. This could make it more difficult for borrowers to apply for finance in the future.

As more states legalize cannabis and hemp for medical and recreational use, more people will start marijuana-related businesses. Many of these people will require funds to kickstart their new venture or cover a shortfall in funds. This is where a good loan product can help. Choosing the right loan with the right interest rates and repayment terms can help a business manage their finances and get quick access to the funds they need.

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August 21, 2019Comments Off
Finding the Best Financial Services in the Cannabis & Hemp Industries

The legal status of hemp and cannabis has certainly improved recently, but growers and distributors may still have difficulty finding financial institutions who want to do business with them. Federally insured banks are not allowed to deal with the cannabis business, and other institutions don’t always want to take the risk. Hemp’s newly federal legal status should open up financing for those in that industry, but change can be slow. Also, no one knows for certain how profitable hemp will be. Although those in the industry may struggle to secure financial services, it’s not impossible. They just need to know where to look.

Cannabis Financial Issues

Although cannabis has become legal in many states for medical and/or recreational use, many banks will not touch the industry. Federally insured banks are prohibited from dealing with cannabis because it is still illegal under federal law. That means even in Colorado or California where cannabis is widely accepted, growers and distributors have to find alternative financing. In some instances, banks might consider loaning money for growing equipment but not the seed or plants. Not only that, business owners cannot even keep their money in an FDIC bank without risking legal action for money laundering.

Cannabis Financial Solutions

Those in the industry have become quite adept at working around financing difficulties. Some companies now specialize in providing cannabis loans. Those wanting to open their own business may also use the following methods:

  • Real estate loans – If you own property, you can use it to secure a loan and then use that money for your cannabis business.
  • Crowdfunding – Small investors are allowed to put up to $2000 each to get a stake in your business. You may choose to use Fundanna, a platform that specializes in the cannabis industry.
  • Private equity firms – Some of these businesses will offer you short-term loans at a high interest rate for your business.
  • Venture capitalists – With some work and luck, you might find a wealthy investor willing to put up the money for your business, but you’ll be giving over a significant portion of your company.
  • Personal loans – If you have strong credit, you might be able to get a personal loan that you can then put toward your cannabis enterprise.
  • Home equity loans – You can also try to get a line of credit against the value of your home and use that cash to fund your cannabis business. Of course, you will be risking your home, so give that option careful thought.

Cannabis Cash

Storing cannabis profits is a problem due to the FDIC regulations, but keeping all that cash at home or at the business is definitely dangerous. Fortunately, some small banks and credit unions have begun accepting money from the industry, giving entrepreneurs discreet access to bank accounts. Of course, many people may simply deposit small cash amounts into their “regular accounts” over time, but that strategy comes with inherent dangers, including charges for money laundering. Openly investing cannabis profits may still pose problems for those in the business. Any financial endeavor with federal ties opens up the legal question once more.

Cannabis Insurance

Those in the cannabis industry can find business insurance coverage, which is vital to maintaining a thriving business. Many growers suffered huge losses in recent years due to forest fires in California and hurricanes in Florida. Since cannabis is not eligible for federal crop insurance, these private insurance companies are a necessity for growers and sellers. They also provide liability coverage, which protects members of the industry in case of lawsuits.

Hemp Financing

The financial status of hemp has changed drastically in recent months. Since hemp has legal federal status, FDIC institutions are no longer prohibited from offering growers and distributors financial services. In fact, hemp is now eligible for federal crop insurance. The only issue with financing may be timing. The financial industry is still adjusting to hemp’s new status, so services may lag a little. Still, the issues that still plague cannabis no longer apply to hemp. is one of the best-known sites for connecting growers and distributors to financial services including real estate loans, equipment loans, business loans and insurance policies. They also provide information on most aspects of the hemp and cannabis industry. New people can break into the industry, but they need to understand the difficulties first. 420Property keep pace with the latest developments and sources of revenue. They are dealing with competition these days as more companies involve themselves in the cannabis business. Financing, investing and simple banking services are challenges for the cannabis industry, although the situation is becoming easier with time. Of course, as long as cannabis is illegal according to federal law, difficulties will remain. Just finding a place to keep the profits is a problem for successful cannabis business people. Hemp producers, on the other hand, are going mainstream. As long as the industry proves profitable, they should be able to get financing as easily as producers of other crops do since they are no longer dealing with an illegal product. In time, cannabis too should join hemp as a totally acceptable agricultural, wholesale and retail endeavor.

August 21, 2019Comments Off
Cannabis & Hemp Real Estate Loans (After the Farm Bill)

The Agricultural Improvement Act of 2018 is now law, and the inclusion of the Cannabis sativa L. plant as an agricultural commodity in this new Farm Bill promises to have great impact in the Hemp Industry. This makes hemp a mainstream crop, and as with other crops, farmers will need land to grow it on and capital to produce it. This agricultural growth is expected to expand into improved financial services and real estate lending opportunities for hemp farming.

Hemp Then and Now

The production and possession of any cannabis plant, including hemp, was prohibited in 1970 due to the Controlled Substances Act, where it was classified as a Schedule I drug. However, the 1937 Marihuana Tax Act (now typically spelled “Marijuana Tax Act”) had already strongly discouraged hemp production over the preceding years. It wasn’t until 2007, that hemp farming officially returned to the U.S. through the issuance of hemp licenses to two farmers in North Dakota.

The 2018 Farm Bill will greatly expand hemp cultivation, though with extensive regulations. The previous Farm Bill of 2014, limited hemp production to small pilot programs for research and study purposes. The new law removes hemp from the Controlled Substances Act. Licensed farmers may now grow hemp for commercial purposes and other uses. The sale, transport and possession of hemp-derived goods is legal, subject to specific guidelines.

Some important restrictions apply:

  • Hemp may only contain up to 0.3 percent THC, the psychoactive compound found in marijuana that delivers the “high” effect
  • Annual inspections are required to test for the level of THC in hemp plants.
  • Individual states will share in the regulation of the production and cultivation of hemp. State plans are subject to approval by the Secretary of the USDA.
  • Licenses are required for hemp farming.
  • States must maintain a registry of industrial hemp farms.
  • Individuals with felony drug-related criminal convictions within the past 10 years may not participate in hemp farming.

Hemp is a profitable and sustainable crop with growth potential. Its new legal status spells possible relief for struggling farmers.

What About Cannabidiol (CBD oil)?

In June of this year, the Food and Drug Administration (FDA) approved an epilepsy drug called Epidiolex and the Drug Enforcement Agency (DEA) classified it as a Schedule V drug, its least restrictive classification. This is of great importance to the Hemp Industry because Epidiolex contains cannabidiol (CBD oil), and its manufacturer, GW Pharmaceuticals, performed scientifically controlled research through clinical trials to substantiate the effectiveness of CBD oil in its drug. The FDA’s approval of Epidiolex signifies official recognition of the potential health benefits of CBD oil. And with the Schedule V classification, this CBD-derived medicine has been placed in the same grouping as cough syrup with codeine.

When coupled with the passage of the new farm bill, this move by the FDA and DEA may signify a future for CBD oil products. The FDA continues to maintain its position against the use of CBD oil in food and dietary supplements, arguing that it’s a drug ingredient. But, research on the potential benefits of this hemp-based product is sure to increase, perhaps clearing the way for a new outlook for CBD oil.

The 2018 Farm Bill and Lending in the Cannabis Industry

In April, the U.S. Small Business Administration (SBA) made it harder for businesses in the hemp industry to qualify for business loans. At the time, their updated lending rules made hemp-related businesses ineligible for SBA-backed loans. Specifically, the guidelines ban companies that are involved in hemp cultivation, production, processing, and distribution and in the sale of hemp-derived products that are unlawful on the state and federal levels. This is a standard attitude in banking for cannabis-related businesses.

Historically, its been very difficult for companies in the cannabis and hemp industry to secure desperately needed funding. Laws preventing the federal government from punishing banks for providing services to the cannabis industry have failed passage repeatedly, making financial intuitions wary of doing business with companies in this industry. These banking shortcomings impact small business owners and entrepreneurs the hardest. The new Farm Bill may change all that.

The new law removes many of the legal restrictions that have limited access to the banking system for hemp farmers. Loans, federal subsidies, insurance and other opportunities will now open up in this industry. The SBA guidelines won’t hit licensed hemp farmers, because their business is now lawful. The previously high risks of dealing with cannabis-related businesses operating in hemp production and hemp-based products will be greatly minimized, encouraging financial institutions to invest in this lucrative industry.

Lenders love profit and hate risk. Now that the Farm Bill has removed many of its murky legal issues, lenders are free to cash in on this desirable commodity. Once the banks are on board, credit card issuers won’t be far behind. Soon, big players in retail will invest. This will make hemp farming even more attractive to financial institutions. As a high-value, high-growth market, the hemp industry has great potential.

Cannabis Real Estate Lending

Along with the provision of other financial services, the availability of real estate loans should increase in the hemp industry. Now that Cannabis plant growers can insure their hemp crops, lenders are likely to feel better about extending real estate loans to farmers. With the move to lawful use and interstate distribution of hemp products, manufacturers, distributors and retailers in this sector don’t pose the risk they once did. Contracting with these businesses to meet their real estate needs is more likely to be viewed as a smart business decision. With the passage of the 2018 Farm Bill, the future is looking far brighter for the hemp industry.

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August 21, 2019Comments Off
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