Everything You Need to Know About Starting Up a Cannabis Business

For a while now, the legal cannabis industry has been growing and reaching new heights each year. This may have some individuals eager to join the market and take advantage of the booming business. If you are one of those individuals, we’ve put together a few things you should consider before starting your own cannabis business and a general process you will need to follow.

What types of cannabis businesses can I start?

As someone who may be new to the legal marijuana industry, you may be thinking that dispensaries and selling cannabis products are the only option when starting a new cannabis business, but there are plenty more. While cannabis dispensaries are one of the more popular options, there are also:

• Breeders
• Cultivators
• Manufacturers or Processor
• Transportation
• Ancillary Companies

You will also need to know if you are handling medical marijuana or recreational marijuana, as there may be different laws or regulations around each one.

While we’ve only touched on a few of the different types of cannabis business, you can see that there is so much more to the cannabis industry than just the sale of the product. Make sure you take the time to find the right type of business that will play to your strengths.

Cannabis Start Up Costs

Let’s be honest, starting a new cannabis business is not cheap, but that shouldn’t scare you away from starting your dream. According to The National Cannabis Industry Association, starting a new dispensary can cost anywhere from $250,000-$750,000. Not only do you have to think about paying for your company’s overhead and worker salary, but there will also be expenses in obtaining license and any legal fees that come with that process.

Keep in mind, there are many factors that can play a part in the cost of starting a cannabis business and depending on what type of business you go into, the price could vary. You will also need to understand that each state may have it’s own laws and regulations, which could factor into the price of starting your business.

 

How To Start a Cannabis Business or Cannabis Startup

CBD industry is the burning career choice in the present era with so many possibilities. So, to start your own set of businesses in the cannabis industry, consider these steps to go on a long way of success.

• Know your Interested Market

Cannabis businesses are available in all shapes and sizes, and the first step you must take is to decide the size and type of your business.

After fulfilling this aspect, you must know that the marijuana business requirements are up from the other businesses that require a fairly basic set of rules. The cannabis laws vary from state to state, and there is the possibility that marijuana is legal in one state and drastically illegal in a neighboring state. You need to spend much time researching and understanding the state and federal rules related to the marijuana business.

• Prepare Your Detailed Cannabis Business Plan

After you have decided your area of interest and understood the basic laws for the marijuana business, now it’s time to prepare a comprehensive business plan. The marijuana industry is a strictly regulated business, and you need to be a bit detailed while preparing a cannabis business plan.

Understand your state laws a bit more carefully, collect all the information from authentic resources from starting the business, target the audience, and follow the regulations. The laws related to the cannabis industry change more apparent, so keep a closer eye on each fluctuation. Make a plan that includes:

• • Your investment and expected revenue
  • You’re Marketing Move
  • Know your competitors and how to Keep your distinctions
  • From where you’ll run your business?
  • Decide about your suppliers.
  • Get services of legal counsel to keep things streamlined.

Once you have prepared all these, now move to the next step.

• Register Your Unique Business Name and Entity

Due to federal restrictions, big businesses are not coming up much into the cannabis industry, and it is the ideal stage for small and local businesses to establish and flourish.

Either small or big, a business needs a proper entity, so choose the right one for your cannabis business. Either you choose LLC or corporation, your business entity affects the taxes you pay and the level of risk you’re exposed to. These entities protect the owners from personal liability.

Once you come up with the perfect cannabis company name, check the availability of a specific name for your business and register your business name for a fixed amount of time by paying a small fee.

• Register Your Cannabis Business and Get Licensed

Every state designed its own set of laws. That is why business permits, cannabis licenses, and registration practices will be required depending on the state/area you want to start your marijuana business. Before setting on any business, either it’s cannabis or conventional type, set your perk of rules to make things vigilant for long.

Do proper research and better contact the legal professional to know and understand the regulations to register your business and get the license. Acquire all the important documentation, license, and other regulatory bodies necessary to set up your marijuana business legally.

Some states have introduced registration portals to licensing marijuana businesses and website designing for the marijuana business to run it virtually.

The marijuana business is allowed under strict rules; even the dispensaries and retailers have to follow some rules and regulations. After the registration, your business is clear to take a start and boom in the specific state.

• Make your Business Tax-filer

To register your marijuana business to pay taxes will be different in different states. However, in each state, Employer Identification Number or, in some states, business tax I.D. The number is necessary to apply for your marijuana business.

The business owner can apply for an Employer Identification Number online from the IRS directly and gets the approval in no time. Your EIN is mandatory to open a business bank account or apply for business funding. Also, this number is essential while you are paying payroll and income tax for your marijuana business.

• Get Finance for your Cannabis Business

Your business needs finance, and the cannabis business application process is more demanding in this aspect as compared to other typical kinds of businesses. Every new entrepreneur must be pre-planned about the business.

The cannabis business has more expenses. To cover these, you must look for cannabis business funding to start and finance your business, which might not be possible without creating a detailed cannabis business plan. Furthermore, any investor or lender you might ask for financing will first prefer to see your entire business plan to figure out the effectiveness of this business strategy to turn a profit.

At the start, you may need an application and licensing fees, and later, regular equipment, marketing, and startup costs will be there. And once the business has started, taxes, maintenance, and depreciation costs are sheer need.

Finding small business loans will be another hard-to-go thing. There is a lack of small business financing for this business as the cannabis business is still not legal federally.

Most of the banks offering small business loans are operating on a national scale and come under federal regulations that make the lending for cannabis business a big “NO”. The laws are stringent, and these banks can’t take the risk of financing federally illegal activities.

To fill up this huge gap, to some extent, the alternative lenders are providing small business loans for marijuana businesses and financing all types of canna-businesses.

As new to the cannabis business, you must be aware of all the obstacles lying in the way to be a successful marijuana entrepreneur.

The Bottom Line

The cannabis industry is in its initial stages and the growth is showing a shiny future for it. So investing in the marijuana business will be a wise idea. However, all of the above, the vital thing is pre-planning and knowing and understanding all aspects of this business.

Must look into all the pros and cons of starting the cannabis business. This is one most complex and restrictive industry and laws are stringent in some states along with costs, financing struggles, and regulatory burdens. Don’t go blank without knowing how to start a cannabis company.

So, think twice about all the complexities. It will help you make a better decision. Once you have decided, follow up on all the above-mentioned steps to prolong progress. Rest assured with your decisions and dedication.

It can be difficult to secure financing for any type of business loan, let alone a cannabis business loan. Because traditional banks don’t provide financing solutions to cannabis companies, you will need to work through a cannabis lender, like Canna Business Resources.  

When working with a cannabis lender, filling out an application is the easy part, getting the approval is what can be difficult. Before you decide to apply, make sure you follow these best practices to increase the chance that your loan will be approved!  

Tips to Securing Cannabis Financing 

• Determine Your Budget 

Determining your budget will help you get the best idea of what kind of financing you are looking for and give you a realistic amount. Asking for too much or too little could either put you in jeopardy of being denied, or not having enough to complete what needs done. 

• Prepare a Proper Business Plan 

With any lender, they want to know that you are serious about your investment. Having a proper business plan can increase your chances of securing a business loan because it shows you took the time to carefully think out and plan. Having a proper business plan can help ease the lenders mind and help them have more confidence in financing you.  

• Work on Increasing Your Credit Score 

This one is self-explanatory. The higher your credit score is, the more it shows lenders that you are reliable and will be a good partner to work with.  

• Lower Your Current Debt 

If possible, lowering your current debt could help increase your credit score, as well as lowering your expenses. If you have too much debt, it can bring in to question how you are using the provided funds.  

• If Needed, Add a Co-Signer 

Adding a co-signer is always a good idea, as it can help reduce the risks in the eyes of the cannabis lender. It’s also a way to qualify for loans that you alone may not be able to do. Before adding a co-signer though, make sure both you and the co-signer understand the risks. Co-signing is not something that should be taken lightly.  

While these are all great ways of increasing the chance you get your loan approved, it doesn’t necessarily mean that there is a 100% chance. There are a lot of different factors that go into loan approval, so make sure you are doing everything you can to reduce risk and increase the chance your loan will be approved.  

 

If you are operating a cannabis company or are looking to start a new one, something you will need to look into acquiring is cannabis equipment. Cannabis equipment loans are there to help businesses purchase these expensive pieces and keep their operations moving and expanding. 

The equipment used by dispensaries, manufacturers, growers, and cultivators can all be very different. Which bring up the question, “what types of equipment can be financed through cannabis equipment financing”? Well, let’s take a look and we will help you better understand.  

What is Cannabis Equipment Financing? 

Cannabis equipment financing is a financial solution for companies that don’t have enough capital to purchase large pieces of equipment without a payment plan. With the help of cannabis equipment financing, operations can acquire the equipment at a monthly cost, instead of a large payment upfront.  

This allows cannabis businesses to receive and begin using the equipment while paying it off. This is a huge benefit as it keeps operations running and allows for growth of the business. To learn more about terms and the different interest rates for cannabis equipment financing, you can contact us here at Canna Business Resources.  

Who Qualifies for Cannabis Equipment Financing? 

There are plenty of businesses that can qualify for cannabis equipment financing, but the most common ones are plant-touching cannabusinesses and ancillary companies. 

Plant-touching cannabis business are those that directly work with the product, such as dispensaries, breeders, cultivators, and more. These types of businesses would most likely invest in cannabis equipment that can help grow, extract, or sell the product.  

Ancillary companies are those that assist or support the plant-touching businesses. These can be operations such as construction, packaging companies, and software companies.  

What Types of Cannabis Equipment can I Finance? 

Ready to apply for cannabis equipment financing but aren’t sure if your equipment will qualify? Below are some of the most common types of cannabis equipment we help financing. 

• Extraction Equipment 
• Kitchen Equipment 
• HVAC
• Cultivation Equipment
• Security Equipment
• Lighting 

To get a more detailed look at what cannabis equipment can be financed, you can work with one of our financial experts who will understand what you are looking for and be able to guide you though the different financing options!  

How to Get Financing for Cannabis Equipment 

As you can see, cannabis equipment financing can be used for a lot of different things and is a huge asset to both small and large cannabis businesses. The best way to get cannabis equipment financing is to work through a cannabis lender, such as Canna Business Resources. We can quickly provide equipment loans with terms and rates that fit your budget.  

If you need help or have questions, or if you’re ready now you can contact us today!

Cannabis in New York – everyone wants in, but operators need to navigate the state’s complex regulatory structure and develop business plans to thrive in an ultra-competitive market.

As we head into this Memorial Day weekend of 2022, the east coast is preparing for its historical jaunt to the beaches. But what of the cannabis opportunity for New Yorkers?

More than a year after marijuana use was legalized for all adults in New York, there’s still a long way to go before the state’s cannabis industry is in full swing. Regulators in the Cannabis Control Board (CCB) and Office of Cannabis Management (OCM) are often asked when it will become possible to walk into a New York dispensary to buy cannabis and cannabis products.

When Will Cannabis Dispensaries Come to New York?

We are getting closer. Timelines now say that some of the first cannabis dispensaries in New York could be allowed to open their doors sometime around spring 2023. That seems like a long way off, but for the cannabis industry, 2023 is right around the corner.

Cultivators have to plan ahead – it takes up to six months (or more) for cannabis cultivators to generate revenue dollar one from planting seeds in the ground. From there, raw materials are consumed by manufacturers to create value add products such as vape cartridges, concentrates, resins, edibles and the like, such additional process can add a further three months to the timeline just to get products to consumers and patients.

That means operators in the licensing process must line up their working capital today to prepare for a surge of demand next spring.

For all of that, Canna Business Resources is focusing on several specific areas to help cannabis operators get ready for launch in New York.

Tips to Prepare for the Cannabis Launch in New York

• Manufacturers

The process of creating value added products and getting them to market is daunting for manufacturers in a highly regulated market. The New York market is bound to be supply constrained and that means manufacturers can be a bottleneck, or they can be a resource. Having the right amount of working capital to launch a thriving and critical part of the supply chain is a major focus of Canna Business Resources.

• Cannabis Retailers

There will not be enough cannabis retailers to serve the New York population. Canna Business Resources is committed to partnering with dispensary owners to finance their grand openings to make sure shelves are stocked properly and there is enough supply in inventory to make it through an expected surge in demand.

• Cultivation operations 

Massive amounts of working capital will be needed to bring much needed high quality flower to the market, including many upstarts that will need financing to provide marijuana flower to the regulated New York market on a timely basis.

Canna Business Resources Focus on Social Equity

The cannabis legalization bill that passed last spring, the Marijuana Regulation and Taxation Act (MRTA), included a goal to issue 50 percent of licenses to “social equity applicants,” as well as stipulations to give material support and training to help those applicants succeed.

The category of social equity written into the bill is broad: it includes communities disproportionately impacted by the enforcement of cannabis prohibition, as well as those who qualify as a minority- or women-owned businesses, distressed farmers, or service-disabled veterans. Lawmakers have proposed bills to include other groups, including trans, nonbinary, lesbian, gay and bisexual individuals.

The state has also implemented a $200 million public-private social equity fund to help finance these social equity entrepreneurs, but the process for application and receipt of funds is daunting and time consuming.

Canna Business Resources in New York

Canna Business Resources has dedicated nearly $30 million to fund social equity license entrepreneurs in New York State and is ready to begin funding immediately to prepare for New York’s monstrous cannabis marketplace. Canna Business Resources has prepared to evaluate, underwrite and fund these entrepreneurs immediately to catalyze growth. Canna Business Resources is currently seeking to help with New York cannabis financing.

Don’t be left out in the cold when the New York market takes off. Contact Canna Business Resources today to see how we can help you set your business up for long term growth.

When operating a business, your main goal is to increase sales of your product and services. And if you are doing a good job of this, there will be a time when the demand for your product exceeds the supply. Now, this sounds like a good problem to have, but, if you can’t keep up with you customer’s demands, you will eventually begin to lose out on their business.  

One of the ways you can combat this problem is by increasing your space, expanding your current operations, or opening a new location. While this option isn’t always easy, Canna Business Resources is giving cannabis businesses the financial tools to make it possible with a Cannabis Real Estate Loan.  

What is a Cannabis Real Estate Financing? 

A cannabis real estate loan allows cannabis businesses to secure the funding they need to begin cultivating, processing, and distributing cannabis. If you have your cannabis licensing and qualify for a loan, there are a few different cannabis business types you can begin expanding on! 

• Dispensaries 

Opening a new location or expanding on your current one will not be cheap, especially if you add in the cost of paying employees and acquiring product. A cannabis real estate loan can help ease the financial burden and get your expansion moving quicker.  

• Cultivating Operations and Greenhouses 

If you are looking to get into the cannabis cultivating industry or expand on current operations, purchasing farmland or greenhouses is a great solution. When opening a new location or expanding, remember that there are cannabis equipment financing you may need to look into, which Canna Business Resources also provides! 

• Manufacturing 

If you are involved in the manufacturing side of the cannabis industry, you are also able to utilize cannabis real estate loans. The manufacturing side of cannabis means you are involved in the extraction and infusion, storing, and packing side of things.  

While there are still other types of cannabis businesses that apply for cannabis real estate loans, these are the most common ones we find. If you have questions or think your business may qualify, contact us to learn more!  

Why are Cannabis Real Estate Loans Important? 

If you are in the cannabis industry already, you probably know that traditional banks and lenders do not offer loans to cannabis companies. This is because marijuana is still an illegal drug at the federal level, which means there is risk involved for the lender. One of the ways the cannabis industry has found a solution to this is by working with cannabis lenders who can provide the financial solutions that cannabis businesses are looking for.  

Without cannabis lenders, the industry would most likely have difficulty securing financing, which would slow the growth of the cannabis market. Cannabis real estate loans are just one of the options, along other things such as cannabis equipment financing, dispensaries loans, and more.  

How does Cannabis Real Estate Financing Work? 

To qualify for a cannabis real estate loan, there are a few different steps you will need to take. Your cannabis loan’s specific features will depend on a few factors. For example, how much money are you contributing to buying the property? As well as if you have a record of success as a licensed cannabis business owner. Below is a quick outline of how the process works. 

• Reach out to Canna Business Resources and get a Free Consultation 
• Apply for a Cannabis Real Estate Loan 
• Preliminary Review to Establish Initial Credit Profile 

• Leverage Expansive Portfolio to Understand the Credit 
• Receive Funding 

If you have questions about the process, we highly suggest you start at step one and reach out. Once we understand what you are looking for, we will draw up a solution that works best with your budget and business needs.  

Our Partnership With 420Property 

Canna Business Resources is proud to work on cannabis real estate loans with 420Property. They are the world’s largest cannabis and hemp marketplace dedicated to real estate and provide different business listings on their website. 420Property’s main goal is to eliminate the challenges of finding real estate for cannabis companies. Working together, 420Property and Canna Business Resources is helping to grow the industry and provide not only easily accessible real estate listings but provide funding and different financing solutions once you’ve found the perfect spot.  

As the cannabis industry in the United States continues to grow at a rapid pace with new markets coming on-line, wholesale prices for flower and related products have fluctuated significantly in the last year. Canna Business Resources expects more price volatility in the coming weeks and months and has solutions for operators to hedge themselves against market factors out of their control.

Cannabis Wholesale

According to Cannabis Benchmarks, the US Spot Index for wholesale flower reached $1,248 per pound (volume weighted average United States wholesale cannabis). This figure represented a 1% decline from the prior week, but a massive 21% decline from the prior year period. Cannabis Benchmarks predicts that the wholesale prices will further decline to $1,225 per pound by the end of this year, with some uptick during the summer months and then further falling off in pricing towards the end of the year. Indoor cultivation accounts for 60% of the total with outdoor just 11%.

With six-month lead times for wholesale cultivators from planting to revenue, wholesale marijuana growers must be vigilant in how they approach expense management during the harvesting period. Cannabis cultivators must conserve and maintain adequate working capital to manage cash flows during the waiting period but importantly they must also lock in a price per pound that makes sense.

From a pricing perspective, some markets are more robust than others.  For example, weighted average wholesale prices were $799 per pound in California, a market that is still reeling and recovering from a difficult last twelve months, while prices were $3,353 per pound in Illinois, the highest prices in the country.

Canna Business Resources has the tools to help cultivators manage these volatile price discrepancies. CBR’s experienced underwriting team has successfully financed more than $25 million in cultivation working capital in the last year and are on pace to double that in the coming year, financing deals in nearly every regulated cannabis market in the United States.

Canna Business Resources can offer the following advice to cultivators navigating these challenging circumstances.

Cannabis Cultivating Advice

1.   Lock in a current price

Odds are that prices in your market are going to drop in the coming six to twelve months. If you are capitalizing on a recent demand uptrend, so are other growers. Lock in your price with a hard commitment contract from your customers.

2.   Obtain enough working capital.

Put together financial statements that accurately predict your working capital needs while you wait for payments from your customers. This factor is one of the most overlooked – yet most important – operational mistakes that Canna Business Resources underwriters observe.

3.   Meet timelines and targets. 

In agriculture, not everything is straightforward. But having the appropriate team in place that can meet operational targets is crucial to the success of a grow operation in a critical period of time.

Canna Business Resources recommends that cultivators should obtain financing for at least 9 months of working capital necessary to successfully see their business through the grow and pricing periods for cannabis cultivators. The company’s underwriting team can analyze nearly every type of cultivation business – from indoor, outdoor, and industrial greenhouse facilities – in nearly every market.

Operators must have adequate and efficient financing in place to weather the waiting period – contact Canna Business Resources today to see how we can help you set your business up for long term growth.

Investors and operating consolidators in cannabis are continuing to wrestle with the issue of brand and brand equity. An early wave of branding association with celebrity, personality and influencer marketing is slowly being replaced with brands associated with product, packaging, and performance. As the industry achieves more widespread legal and social acceptance, branding around product quality, effectiveness and consumer acceptance is becoming as or more important that celebrity association.

For the time being, however, as the pathway to brand development remains very much in flux, and Canna Business Resources expects to see more in the way of licensing partnerships and distribution relationships rather than mergers and acquisitions. This means operators and branded products companies will need to focus on their working capital channels to meet the needs of their licensing partners. To that end, there are some critical lessons to share from some of CBR’s most successful branding clients.

Tips for Successful Cannabis Branding

• Distinguish Your Brand

There are many brands both within individual markets and some that transcend markets, and you need to determine how you want to establish your company, your brand identity, separate from price. Everyone will be competing on price – how does your product differentiate itself?

• Distribution is Critical, but Shelf Placement is Just as Important

This is retail! Without appropriate shelf placement and display, consumers won’t know how to find your brand.

• Ensure Budtender Awareness

Following on from the prior point, even if you have optimal shelf space, if the budtenders are not familiar with the brand, or the brand is not selling, they won’t be introducing it to consumers. Make sure you are encouraging engagement and education!

• Understand Your Target Audience

Effectively marketing to your target market with packaging designs, digital marketing, and more can really make a difference. Taking time to really know your cannabis consumer will be a huge benefit when working to increase your brand awareness.

Cannabis Product Growth

As the industry grows, different cannabis product categories will grow in popularity. For example, by 2026, edibles are expected to consume as much as 20% of the market’s total sales, up from just 5% just a few years ago.

According to a survey by MLive, nearly 38% of cannabis visitors to a cannabis dispensary try a new dispensary because of the presence of new, high-quality brands.

Cannabis Brand Strategies Next Steps

To meet the demands of this rapidly evolving sector, brand builders must utilize multiple advertising channels and exercise efficient capital allocation to maximize return on investment. Breaking into retailers is one thing – having runway to beat break-even, sell through inventory, replenish raw materials and meet consumer demand is a different ballgame.

Canna Business Resources can help. We provide extensive working capital and equipment financing for branded products companies in the cannabis sector all over the United States. We have financed more than $45 million just to branded cannabis businesses, small, medium, and large, and continue to expand our capital availability every day. Contact us today to learn more!

With any company, we think it is important that the people you work with understand who you are. Things such as your beginnings, your goals, and what drives you to be better each day. That’s why we wanted to take some time for you to get to know us. 

The Idea of Canna Business Resources 

All great companies begin by finding a need in society and it was no different for us. As the legal marijuana industry began to build up, it was obvious that there was a specific need for new cannabis companies who were looking for help.  

Starting a new cannabis business is not cheap, and without the right tools, it can make it very difficult to succeed. Traditional banks and lenders aren’t able to provide businesses in this new industry with the financial help they need, and so began the increasing demand for cannabis lenders.  

As the industry grows and the need for cannabis financing increases, we are committed to providing the most excellent service and solutions.  

Canna Business Resource’s Goal 

Our goal at Canna Business Resources is to be a pioneer in the cannabis lending market. We want to provide businesses in the cannabis industry with the tools and expertise they need to run their operations.  

Not only are we focused on maximizing profits for our client’s current customer base, but we have the ability to provide solutions to clients who want to expand and increase when new opportunities present themselves. Canna Business Resources is truly your partner in the cannabis business, and we will help provide solutions when you need them.  

What do we offer? 

Canna Business Resources is proud to offer a wide range of products and services that we believe any cannabis business would need for their financing goals. To get a better understanding of what we can provide, here is a list of a few of our services. 

• Working Capital 

We are one of the only lenders in the cannabis industry to offer fully uncollateralized working capital financing. These financing options can be used for licensed operations and ancillary companies. Everything can be customized to the users needs with our bespoke financing options. 

• Cannabis Equipment Financing 

Cannabis companies continue to grow, and one of the things you may need when expanding is more cannabis equipment. With some of the most competitive terms in the market, there is no doubt that you can find the plan that works best for you. We even have the ability to provide financing for any major equipment pieces, even specialty equipment for the hemp and CBD industries. 

• Cannabis Real Estate Financing 

If you are looking to expand your operations and acquire more assets, our cannabis real estate financing option may be the perfect solution for you. We can assist you in refinancing, new construction, or any expansion projects. The cannabis real estate financing covers different types of operations, including cultivation facilities, vertical integration, and manufacturing facilities.  

• AR/Invoice Financing 

As one of the leading cannabis lenders, we can provide A/R and reverse A/R invoice financing on a revolver basis. Our receivable financing product acts as a revolving line of credit for your cannabusiness and does not require additional collateral. 

Why Choose Us for Cannabis Financing  

When it comes to starting or expanding your current business, you can be sure that Canna Business Resources will be there every step of the way to help you make the right financial solution. We’ve also got the ability to provide cannabis loans up to $15 million, ensuring you have enough capital to grow. 

 In 2021 alone, we were able to provide more than $100 million to borrowers in the U.S., and we look forward to increasing this number and providing growth in the cannabis industry. You can contact us or schedule an appointment to talk with one of our experts.  

In 2021, cannabis mergers and acquisition in the industry totaled $10.1 billion in value across 209 transactions in the United States alone. Both of those figures exceeded the amounts and dollar values in 2019 and 2020.

In addition, natural industry consolidation is fully underway, as is investor pressure on public MSOs to increase cannabis sales and expand markets.

On March 23rd, Cresco Labs become the market leader in cannabis with the acquisition of Columbia Care. The graphic below illustrates the enormity of this deal, and reflects the large number of historical transactions leading to this effective industry consolidation. As a result, Cresco becomes the largest multi-state operator (MSO) by pro forma revenue ($1.4B), with a footprint of over 130 stores in eighteen U.S. markets, among many other significant milestones and market shaping elements brought to light by this transaction.

What are the factors driving the surge in activity in the cannabis industry?

• Fierce competition 

Key markets are incredibly competitive, and operators are looking for new and innovative ways to achieve scale in these markets. An acquisition vertically or horizontally can provide pricing or cost scale as operators grow their cannabis business.

• Valuations 

We are seeing valuations on the equity side really start to normalize and in order to maximize equity valuations operators should consider enlarging their cash flow base.

• Saturation

As some of the key markets become saturated and growth slows from double digits to single digits, consolidation is a key strategy to expand operating margins.

What segments of the market will be most affected in 2022? According to Net Frontier Data, in 2021 the cultivation segment comprised 83% of the total M&A activity as MSOs looked to scale their operations in key toehold states. However, we believe that in 2022 branded products and manufacturing companies will be the most desirable candidates as well as successful retail brands in key markets.

2021 Cannabis Mergers and Acquisitions by Market Sector

As you can see, most of the cannabis mergers and acquisitions took place in the cultivation and retail space, also considered plant-touching cannabis companies. With such a hot start for legal cannabis and the cannabis market in 2022, we don’t believe this trend will slow down.

How can CBR help you navigate this quickly changing and dynamic market? 

Canna Business Resources is ready to offer its borrower clients financing term sheets to secure an acquisition. CBR has more than ten years of experience financing cannabis acquisitions – big and small – in the cannabis space. Our operating partner experts have participated in hundreds of acquisitions in the cannabis sector and know what it takes to successfully consummate an M&A transaction.

At CBR, we underwrite both companies – the acquirer and the target – to produce the most effective and customized financing solution for our partners. We can even assist in the evaluation of the target, a unique value-added service that no other lender can provide.

Since inception, CBR has completed over $30 million of acquisition financing and we expect that number to double by the end of this year.

In order to begin the process, submit your application with the acquisition notes. We will underwrite a term sheet in one day and provide you the ne negotiation leverage you need to go to the negotiating table.

Prepare yourself for rapid growth. Get a CBR term sheet.

According to the 2022 MJBiz Factbook, sales of recreational and medical cannabis in the United States outpaced all of Starbucks’ North American sales during 2021, reaching between $24.5 billion and $27 billion in total cannabis sales last year.

As your business keeps pace with this breakneck growth, efficient capital structures will be critical to accessing raw materials, scaling your HR team and improving your people.

Between lawmakers, regulatory headaches, taxation headaches, and HR challenges, how can you possibly focus on your company’s cannabis capital needs without letting something slip?

Build Your Cannabis Business Plan

First, you need a plan. How much capital do you need? What is the cost of capital? What is the term? Do you need equity or debt?

In this first series of columns we will provide first rate advice on how you – the reader, the operator, and the entrepreneur – can optimize canna financing programs so you do not distract yourself from the important parts of your business.

Depending on the needs of the business and the business type, the form and function of financing your cannabis enterprise will change.

Financing Canna Equipment

Cannabis equipment is critical to rapid growth for cannabis businesses. Whether that means extraction equipment, specialty lighting, HVAC, or heavy-duty kitchen materials and equipment, you want to extend the financing term as long as possible and secure the best possible rate.

How can you do that when there are seemingly so many different options available and the time involved takes you away from the day to day?

Trusted sources are the most important. Most banks still do not finance cannabis equipment, so private lenders are the primary option for operators. Lenders should be getting into the details with you – depending on the equipment type, its use, cost, and useful life – the optimal structure can be integrated into your revenue streams so you can get back to doing what you know best.

Cannabis equipment loans can be short term in nature, but usually can stretch between 24 and 36 months, depending on the type of cannabis equipment. Sometimes, on small equipment purchases, you can finance 100% of the cost of the product.

Additionally, private lenders can offer loans against existing cannabis equipment, not just brand new equipment, which can be used to help boost proceeds.

The industry is growing faster than it ever has, particularly in key new markets that are coming online, and you need to be prepared to grow with it. For operators that need to purchase equipment, or own equipment outright, you can utilize those assets to capitalize your business without taking on any dilutive equity.

Cannabis Equipment Financing vs. Cannabis Equipment Leasing

When it comes to equipment financing, that equipment is considered yours. In different leasing scenarios, the lender would own the title of the equipment and give you the opportunity to repurchase it at the end of the lease. So when you chose canna equipment financing, it is providing your business with the opportunity to own the piece of equipment.

Cannabis Business Loans With CBR

Canna Business Resources provides not just capital, but holistic solutions for cannabis companies that need financing options. CBR has a multitude of non-dilutive financing products intended to create value for your business and your customers and can structure a solution that is optimal to operators in every cannabis vertical.

Please contact us so we can start our discussions on your financing needs.