Common Types of Loans for Hemp & Cannabis Businesses

Common Types of Loans for Hemp & Cannabis Businesses

Unlike most industries, companies that work with hemp and cannabis find it challenging to secure loans through banks and credit unions. Unfortunately, federal law makes it nearly impossible for traditional banking institutions to work with the hemp and cannabis industries. Even when a presidential administration says that its Department of Justice will not pursue cases in states with legal cannabis, banks know that the next administration could take the opposite approach.

Luckily, private lenders have stepped in to help cannabis and hemp businesses meet their funding goals. At Lender420, we help you find a lender that can meet your needs. It helps, however, to know what type of loan will benefit your company most.

The following list will introduce you to the common types of loans for hemp and cannabis businesses.

Real Estate Loans for 420 Properties

The best cannabis real estate for sale can cost a lot of money to buy. The downside is that you need to accumulate a sizable amount of money before you can buy a storefront, farm, greenhouse, or warehouse space. In return, you get several benefits, such as:

  • Access to a large community of cannabis consumers willing to pay for quality products.
  • Visible storefronts that commuters see throughout the day.
  • Locations with heavy foot traffic.
  • Cannabis-friendly neighborhoods that charge reasonable taxes and let you meet consumer demands.

Unless you have a couple of million dollars saved, you will have a very hard time purchasing 420 properties without relying on a loan. Commercial real estate loans can fall anywhere from $500,000 to $25 million. A larger company with excellent credit might even qualify for higher sums.

Ideally, you can make a down payment that covers at least 30 percent of the commercial real estate’s appraised value. Qualified borrowers, however, can possibly get loans with small down payments.

Loan terms typically last from six months to 10 years. You can expect to pay 7 to 15 percent interest.

You can get the lowest interest rates by developing an excellent business plan, maintaining a high credit rating, and making a larger down payment.

You have a lot of options, and even a couple of percentage points can make a huge difference in the amount you repay. Get the best deal by starting your search with Lender420.

Equipment Loans

All types of cannabis businesses need equipment loans. If you own a dispensary or storefront, you can use an equipment loan to purchase items like security systems, point-of-sale systems, and even attractive shelving that will make products more appealing to customers.

In a greenhouse, you can use an equipment loan to help you buy irrigation systems, solar power panels, and machinery that helps you move products efficiently.

Grow houses based inside warehouses have significant equipment needs. Lighting and irrigation systems can cost thousands upon thousands of dollars. There are cheaper options, but they rarely work as well as highly calibrated systems that help cannabis plants reach their maximum potential. When you want large flowers with high THC and CBD percentages, it makes sense to buy the right equipment. You could save money in the long run.

In some cases, you can lease equipment. Owning is usually the best option, though. Equipment loans from Lender420 make it possible for you to get the items you need to streamline your business and cultivation processes.

Loan terms usually fall between one and seven years. Rates tend to start around 7 percent. With lease-to-own, you can finance up to 100 percent of the equipment’s cost.

Hemp and Cannabis Business Loans

Hemp and cannabis business loans give you more control over how you spend the money you borrow. Lenders will want to know how you plan to spend the money, but you are not restricted to specific items like equipment or real estate.

Lines of Credit

Lines of credit are extremely flexible. Your credit cards are lines of credit, so you can expect your cannabis business line of credit to work much the same.

There are some specific cases when you have restrictions on how you use your credit. For example, you might have a line of credit with a cannabis wholesaler. In that case, you can only use your credit to purchase products from that company.

When you have a line of credit from a private lender, though, you open your business to more growth opportunities. For example, you know that you can purchase the inventory you need without running out of money to meet payroll. When you find yourself in a tight spot, you can tap into the line of credit for temporary help.

Working Capital Loans

Working capital loans play a similar role as lines of credit. They are not long-term loans that you use to grow your business. Instead, they are small, short-term loans that fill in the financial gaps that businesses often experience.

The next time you find yourself wondering how you can pay all of your expenses, you should look into a working capital loan. Lender420 can put you in contact with a reliable lender with reasonable rates.

Real Estate Sale-Leaseback Funding

Real estate sale-leaseback funding is a creative way for you to maintain control of your property while using it to borrow the money you need to operate a business.

The arrangements typically involve finding a third-party lender willing to let you borrow an amount of money approximately equal to the value of the real estate. You retain ownership of the property as long as you continue repaying the lender.

To an outside observer, it looks like you’re leasing the property. In reality, you own the property but you pay someone else because they let you use the real estate as collateral.

Explore Your Cannabis Funding Options With Lender420!

You have plenty of funding options to start or grow your cannabis and hemp industry business. Start by filling out a Lender420 application. We’ll contact you to discuss opportunities and help you choose a great solution.

October 14, 2022Comments Off

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