Understanding Cannabis Business Loans in New Jersey

business loans new jersey

In January 2021, New Jersey legalized the sale of recreational marijuana, and as of 2023, there are 24 recreational dispensaries throughout the state — many of which were converted from medical dispensaries. As a cannabis business owner in the Garden State, you can grow your company by tapping into business loans in New Jersey.

The following guide will introduce you to the best business financing options to fuel your business expansion, along with what you can expect from the process and how it can take your business to the next level.

How Do Cannabis Business Loans in New Jersey Work?

The New Jersey Cannabis Regulatory, Enforcement Assistance, and Marketplace Modernization Act permits the sale of recreational cannabis in the state. But given that marijuana legalization is occurring state by state, cannabis loans aren’t available from traditional banks or small-business lenders. But cannabis companies can seek specialized loan programs from a cannabis business lender. 

Cannabis business loans in New Jersey can include any of the following:

  • Dispensary loans: Used to launch or expand a dispensary
  • Equipment loans: Used to purchase additional equipment
  • Working capital loans: Offer flexible funding for day-to-day operations
  • Commercial real estate financing: Used to purchase commercial property
  • Accounts receivable/invoice lines of credit: Bring flexible funding based on prior invoices

These loan programs can each provide you with the funding you need to maintain your current operations, but they can also provide the resources you need to expand your business.

5 Tips for Securing Business Financing in New Jersey

Before you apply for a business loan, you’ll need to do some homework. The more you can reasonably prepare, the better your chances are of securing financing to grow your New Jersey-based cannabis business. 

With that being said, here are five tips to get you started:

Assessing Your Needs

Start by evaluating your internal business needs — after all, you don’t want to apply for too little or too much — and then set basic priorities. Determine whether you are planning to invest in additional retail space, equipment or a new marketing platform. 

List of each of your goals, and get some estimates from contractors or service providers to determine the financial impact. Doing so will help you zero in on a target for your small-business loan.

Researching Cannabis Lending Options

Your next step should be to research your cannabis funding options. First, determine the type of loan that would work best for your needs. An equipment finance loan, for example, could be ideal if you’re looking to upgrade your point-of-sale equipment, but a working capital loan would be best for covering your operational expenses.

From there, do some research to compare cannabis lenders. Aim to compare at least three different lenders and compare the following aspects of each:

  • Loan terms
  • Interest rates
  • Eligibility criteria
  • Additional fees

In doing so, you’ll guarantee that you secure the best possible terms and rates for your future loan.

Gathering Necessary Documents

Regardless of the lender you choose, you’ll need to provide documentation when you apply for small-business funding. The exact requirements vary by lender, but you should expect to produce documents such as:

  • Financial statements (cash flow statement, balance sheet, profit and loss)
  • Cannabis business license
  • Past bank statements 
  • Business tax records
  • Business plan
  • Business licenses/articles of incorporation (if applicable)

Lenders will also perform a credit check to determine your loan eligibility and your potential interest rates. If you apply to multiple lenders, do so within the same 30-day window to minimize any impact it may have on your credit report.

Keeping these documents organized and up to date will ensure you’re always prepared to apply for a loan, and accurate records also improve your chances of being approved by your lender.

Update Your Business Plan

Every small-business owner understands the importance of keeping an up-to-date business plan. A well-written business plan will keep you focused on your organizational goals. It will also demonstrate the value of your business in the eyes of lenders and stakeholders.

The U.S. Small Business Administration recommends that your business plan include the following sections:

  • Executive summary: What are the key points of the plan?
  • Company description: What need does your business satisfy?
  • Market research: What is your target market? How will you reach it?
  • Organization and leadership: What is your leadership and legal structure?
  • Service or product line: What do you actually sell?
  • Funding request: How much money do you need? 
  • Financial projections: What do you expect from your business?
  • Appendix: Include any additional data.

Even if you’ve created a business plan in the early stages of your business, it’s important to update it with any recent changes to your leadership or financial projections. The more accurate your plan, the more likely lenders will be to extend their financing options.

Applying for a Cannabis Business Loan

Once you’re ready to apply for a cannabis business loan, you’ll complete the application process. These are the steps you might walk through when applying for cannabis financing:

  • Determining the type of loan you need
  • Comparing three different lenders to find the best option
  • Gathering your required documentation
  • Completing the lender’s application
  • Waiting for the lender to review your application
  • Receiving your funding
  • Committing to the repayment schedule

Choosing the right lender is important. A high-interest rate, for example, can cause you to pay more over the life of your loan, and though a longer loan term may result in more interest payments, it can reduce the size of each of your monthly payments, which can be helpful when funding large or long-term projects. 

Why Working With Professional Cannabis Lenders Is Key

Even in New Jersey, where cannabis is now legal, it can still be challenging to obtain marijuana business financing given that banks and traditional lenders are reluctant to fund cannabis-based businesses. 

Even if that should change in the coming years, a dedicated cannabis lender is still your best option, as it will understand the unique challenges facing the cannabis industry. A professional cannabis lender will have the experience and the expertise to guide you to the best loan program to meet your organizational goals. 

Additionally, a professional cannabis lender will be able to help you secure funding for specific cannabis-related business needs, understanding cyclical sales trends and helping you secure the working capital to expand or strengthen your inventory.

Be Part of New Jersey’s Future

New Jersey recreational cannabis sales topped $328 million in 2022 — allowing the state to collect $20 million in tax revenue. Cannabis business owners play an important role in the state’s economy, and it’s likely that this trend will continue as more licenses are distributed and more businesses open their doors.

Existing cannabis companies also will need to tap into business loans in New Jersey to stay ahead of the competition. Expanding your business today will give you the resilience you need for tomorrow, and that’s something you can grow on.

Frequently Asked Questions

Q: Is marijuana legal in New Jersey?

Yes. Recreational marijuana has been legal since Jan. 1, 2021, when Gov. Phil Murphy signed the New Jersey Cannabis Regulatory, Enforcement Assistance, and Marketplace Modernization Act into law.

Q: Do financial institutions in New Jersey lend money to marijuana businesses?

Traditional banks and small business lenders do not typically lend money to marijuana businesses, but you can still obtain funding with a professional cannabis lender.

Q: Do cannabis companies do well in New Jersey?

Data from 2022 reveals that the recreational cannabis market topped $328 million that year, and the market continues to grow, creating additional opportunities for new or expanding cannabis business owners.

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