Managing cash flow for a cannabis business can be challenging. The constant waiting for customers to pay their invoices can make it difficult to keep the business afloat.

But imagine if there were a solution that allowed you to access the funds you need when you need them. What if your accounts receivable (AR) could serve as collateral to secure a loan?

Introducing cannabis AR financing — a game-changing financial option. This innovative type of loan uses your AR as collateral, providing a quick and hassle-free way to obtain the necessary capital without relinquishing equity in your business.

What is Cannabis AR Financing?

Cannabis AR financing is a specialized financial solution designed to address the cash flow challenges cannabis companies face. With this type of financing, cannabis businesses use their outstanding invoices (accounts receivable) as collateral to secure a loan or line of credit.

The key difference between cannabis AR financing and traditional financing options lies in the collateral used and the lending criteria. Traditional banks and financial institutions may be hesitant to provide loans to cannabis businesses because of the industry’s regulatory complexities and perceived higher risk.

Cannabis AR financing takes a different approach by focusing on the value of the outstanding invoices and the likelihood of timely payment by customers. This allows cannabis companies to access capital without giving up equity in their business or facing the typical barriers associated with traditional financing.

Current Cash Flow Challenges for Cannabis Companies

Cash flow challenges cannabis companies face stem from the industry’s unique characteristics and regulatory environment. 

One of the most significant obstacles for cannabis companies is restricted access to traditional financing channels. Because of cannabis’s federal classification as a Schedule I controlled substance, many financial institutions, including banks and credit unions, are hesitant or prohibited from providing loans or financial services to cannabis businesses. This lack of access to mainstream financing options severely limits their ability to secure capital for operational expenses and growth initiatives.

The cannabis industry is known for its high operating costs, which include expenses related to cultivation, processing, compliance, security and distribution. The industry’s cash-intensive nature poses challenges for cash flow management. Handling significant amounts of cash for transactions can be risky and cumbersome, leading to increased security expenses and making it difficult to monitor and track cash flow effectively.

Cannabis is legal for medical or recreational use in many states, but it remains illegal at the federal level. This creates a complex regulatory landscape with varying rules and compliance requirements from state to state. The ever-changing regulations and uncertain legal status can impact the operations and financial stability of cannabis companies, leading to cash flow fluctuations and challenges in planning for the future.

The illegal status of cannabis at the federal level also makes cannabis companies ineligible for traditional credit solutions, such as Small Business Administration (SBA) loans. The government-backed loans are typically accessible to other small businesses and offer favorable terms, but cannabis businesses are excluded from this valuable source of financing because of the industry’s federal legal classification.

The legal ambiguity surrounding marijuana has led to banks’ reluctance to establish relationships with cannabis companies. As a result, many cannabis businesses struggle to find banking partners willing to provide essential financial services like checking accounts, merchant processing and other banking facilities. This lack of banking services exacerbates cash flow management challenges, making it difficult for businesses to efficiently manage their funds and financial transactions.

The traditional avenues for raising funds, such as venture capital or private equity investments, may also be less accessible for cannabis companies because of the industry’s perceived risk. Investors and institutions may be hesitant to invest in cannabis businesses, fearing potential legal and regulatory complications that can hinder growth opportunities and limit available funding sources.

Despite the challenges, specialized lenders offer a solution. Cannabis AR financing is just one of the many different types of financing cannabis lenders offer to meet the needs of cannabis businesses.

Advantages of Cannabis AR Financing

Here are a few of the main advantages of cannabis AR financing: 

Improved Cash Flow Management and Working Capital

Cannabis AR financing enables businesses to convert their outstanding invoices into immediate cash, improving their cash flow management. Instead of waiting for customers to pay their invoices, the company can access funds upfront, allowing for smoother day-to-day operations. The increased working capital provides the flexibility to cover operating expenses, pay employees and invest in new initiatives without disruptions caused by delayed payments.

Access to Immediate Funds for Business Operations

With cannabis AR financing, companies gain rapid access to funds based on the value of their accounts receivable. The quick infusion of capital is particularly valuable in an industry with high operational costs and cash-intensive transactions. Businesses can promptly address unexpected expenses, seize time-sensitive opportunities or invest in critical resources, helping them remain competitive in a fast-paced market.

Reduced Reliance on Traditional Financing Options

Given the limited availability of traditional financing options for cannabis companies, AR financing provides an alternative and reliable source of funding. By leveraging their accounts receivable as collateral, cannabis businesses can bypass the hurdles and uncertainties associated with seeking loans from conventional banks or other financial institutions. The reduced reliance on traditional financing allows cannabis companies to sustain and grow their operations without being held back by the lack of accessible capital.

Flexibility and Scalability to Support Business Growth

Cannabis AR financing offers flexibility in managing financial needs, especially during periods of expansion or increased demand. As the business grows, so do the outstanding invoices, providing a scalable financing solution. Unlike fixed loan amounts, the funding available through AR financing adapts to the company’s evolving financial requirements, enabling seamless adjustments to support business growth.

Example of AR Financing for a Cannabis Company

Imagine a cannabis cultivation company facing cash flow constraints because of delayed payments from their dispensary clients. As the company continues to produce high-quality cannabis products, it experiences an increase in demand from retailers. But the extended payment terms in the industry mean it must wait weeks or even months for their invoices to be settled.

To maintain its operations and meet the growing demand, the cannabis company decides to pursue AR financing. It partners with a specialized lender that evaluates the creditworthiness of its dispensary clients and the value of outstanding invoices. Based on this assessment, the lender approves a financing amount equal to a percentage of the outstanding invoices.

With the immediate infusion of funds, the cannabis company can purchase essential supplies, expand its cultivation facility and invest in advanced equipment to meet the rising demand. The improved cash flow management allows it to pay its employees on time and maintain a steady production schedule without facing financial strain.

As its accounts receivable continues to grow with increasing sales, the company can access additional funds through AR financing. This flexibility ensures it can continually support its business growth without giving up equity or relying on traditional financing options with limited accessibility.

The Process of Cannabis AR Financing

The process may vary slightly from lender to lender, but generally, the steps are the same:

1. Application and documentation: The process begins with the cannabis company applying for AR financing with a specialized lender that offers this type of financial product. The company must provide relevant documentation, including details of its outstanding invoices, customer information and historical payment records.
2. Assessment of invoices: The lender carefully reviews the outstanding invoices to determine their value and legitimacy. It will typically consider factors such as the total amount of outstanding invoices, the age of the invoices (how long they have been due) and the credit terms offered to customers.
3. Customer creditworthiness evaluation: One of the critical aspects of cannabis AR financing is the assessment of the creditworthiness of the cannabis company’s customers, who are responsible for paying the outstanding invoices. The lender will evaluate the customers’ credit history, payment patterns and overall financial stability. This step is crucial because the repayment of the loan depends on the customers settling their invoices promptly.
4. Loan approval and terms: Based on the assessment of the invoices and customer creditworthiness, the lender will decide whether to approve the loan and determine the loan amount and terms. The loan amount is typically a percentage of the total value of the outstanding invoices, and the interest rate and repayment period will also be defined at this stage.
5. Funds disbursement: Once the loan is approved, the cannabis company can access the funds from the lender. The funds are disbursed based on the value of the accounts receivable that the company has pledged as collateral. This provides the company with immediate access to the capital it needs to address various financial needs, such as covering operational expenses, investing in growth or purchasing inventory.
6. Loan repayment: As customers pay their outstanding invoices, the cannabis company uses the proceeds to repay the loan to the lender. Depending on the terms of the loan, the payments may be made in installments or as a lump sum when the invoices are settled.
7. Ongoing relationship: The relationship between the cannabis company and the lender continues throughout the loan period. The lender may provide periodic updates on the status of the outstanding invoices and work with the company to ensure timely repayment.

Boost Your Green and Grow with a Specialized Lender

Cannabis AR financing is an option for cannabis businesses seeking financial support and flexibility. By leveraging accounts receivable, businesses can access the working capital they need to navigate the industry’s challenges and capitalize on growth opportunities. Navigating the complexities of cannabis financing requires expertise and an understanding of the industry’s regulatory landscape.

Working with a specialized lender can be a crucial step in securing the ideal financial solution for your cannabis business needs. A specialized lender with experience in the cannabis sector can provide tailored advice and explore various financing options, including cannabis AR financing, to meet your requirements. It can help navigate the intricacies of the cannabis industry, address regulatory concerns and devise a customized financing plan that aligns with your business goals.

With the right specialized lender, cannabis businesses can unlock their full potential, seize growth opportunities and confidently navigate the dynamic cannabis market. Don’t hesitate to explore cannabis AR financing and other suitable options with a knowledgeable partner to pave the way for your business’s success.

Frequently Asked Questions

Q: What is the difference between AR financing and factoring?

AR financing uses accounts receivable as collateral for a loan, while factoring involves selling the invoices to a third party at a discount for immediate cash.

Q: Is AR financing worth it for cannabis companies?

Yes, AR financing can be beneficial for cannabis companies to improve cash flow and quickly access funds without giving up equity.

Q: What are the types of accounts receivable?

Types of accounts receivable include trade receivables from customers, nontrade receivables from noncustomers and notes receivable or promissory notes.

As your business grows, so do your needs. Most business owners can turn to a bank or traditional lender to fund the purchase of new equipment. But cannabis business owners face unique challenges. But you can still tap into marijuana equipment financing through a dedicated cannabis lender and use the funds to fuel your expanding business.

Here’s what you can expect from these loan programs, including their numerous benefits and how they can help you cultivate a more successful business.

How Does Marijuana Equipment Financing Work?

A business equipment loan is a specialized form of financing that allows you to fund the purchase or lease of business equipment. These loan options are common for business startups, but any business can use an equipment loan to purchase or upgrade their equipment to fuel their business growth.

Common applications for an equipment loan include:

• Point of sale (POS) equipment
• Cultivation equipment
• Extraction equipment
• Kitchen and storage equipment
• Computers and office equipment
• HVAC and facility equipment
• Commercial vehicles
• Office furniture
• Software programs and upgrades

Equipment loans should also be large enough to cover the installation and maintenance of this equipment, so plan ahead before you apply. And for larger equipment, request an estimate of installation costs to help you plan your loan amount.

These business loans typically come in a lump-sum payment. Business owners repay the loan according to a predetermined payment schedule, which includes interest owed. Lenders may ask you to specify how you intend to use the loan. But once the funds are approved, you can generally use them for any business-related equipment lease or purchase.

Challenges Faced in Financing Marijuana Equipment

The cultivation, sale and possession of cannabis remains illegal at the federal level, with marijuana legalization proceeding on a state-by-state basis. As a result, most banks and traditional lenders aren’t willing to approve a business loan for cannabis business owners.

Cannabis companies must look elsewhere to obtain funding — whether for equipment, commercial real estate or working capital loans. But with the right lender, you can tap into the funding you need to purchase, lease or upgrade your business equipment. 

This challenge comes with an unexpected advantage: a dedicated marijuana lender will have insider knowledge of this challenging industry. By pursuing marijuana equipment financing through a dedicated cannabis lender, you’ll gain access to both the funds and the expertise you need to fuel your business growth.

Benefits of Marijuana Equipment Financing

The advantages of cannabis equipment financing include:

• Easy access to necessary equipment for marijuana businesses: An equipment loan will be easier to qualify for than a larger loan, giving you quick access to the funds you need to purchase or upgrade your equipment.
• Flexibility in terms and repayment options: Cannabis lenders provide flexible loan terms and interest rates so you can tailor your loan repayments according to your monthly budget.
• Potential tax advantages and incentives: For most equipment loans, you can deduct interest paid from your annual business income taxes.
• Varied applications: You can use cannabis equipment financing loans for multiple applications, ranging from cultivation and storage of products to point of sale (POS) devices and back-office equipment. Most equipment loans will also cover the cost of installation.
• Straightforward loan terms and fees: Cannabis business lenders offer straightforward loan terms and fees. This gives business owners a clear picture of how their loans will work in relation to their broader business finances.

Technically, cannabis equipment loans can overlap with other financing options. Working capital loans, for example, might cover at least some of your day-to-day business equipment. But an equipment loan will be ideal for growing businesses that need to purchase, lease or upgrade their equipment to meet increasing demands and outperform competitors.

How to Qualify for Marijuana Equipment Financing

To obtain marijuana equipment financing, you’ll first need to find a dedicated cannabis lender. Remember: Most banks and small-business lenders don’t work with cannabis companies. Once you find a cannabis lender, you’ll go through the application process. The exact details of the process differ by lender, but you can generally expect to provide the following:

• A completed loan application
• A business plan
• Financial records (balance sheet, profit-and-loss statement, etc.)
• Documentation of cannabis licensing and business permits

Your lender will review your application and business finances — including your business credit score. Your financial stability will determine your eligibility for equipment finance options, with favorable rates and terms going to businesses with a strong track record and healthy credit score.

Key Considerations When Choosing Marijuana Equipment Financing Options

Before you commit to a cannabis lender, you’ll need to consider factors such as:

• Your financing needs: Start by determining the exact costs of the equipment you intend to purchase, along with any installation requirements. This will ensure that you obtain the funds you need.
• Other types of loans: Equipment loans are not your only option. You might consider dispensary or working capital loans, which can also provide financing for certain types of equipment. The final decision may depend on the amount of funding you need and the terms set by cannabis lenders.
• Interest rates: Cannabis lenders use varied interest rates. Because your interest payments can have a profound impact on the total cost of your loan, it’s important to compare at least three lenders before committing to equipment financing.
• Repayment terms: The lifespan of your loan will determine the size of your monthly payments. Make sure to select a lender that offers a reasonable repayment term so your payments fit comfortably into your monthly business budget.
• Fees and penalties: Lenders can attach additional fees and conditions that add to the cost of your loan. Pay attention to things like repayment penalties, which will prevent you from paying off the loan before the loan term is complete.

Cannabis lending options are limited. But by comparing the loan terms and interest rates of three lenders, you can have greater confidence that you’re getting the best deal for your business.

Keep Your Business Growing

The cannabis industry is growing. As more states legalize recreational marijuana, existing cannabis businesses can expect to see a higher sales volume. They can also plan to see more competition. Marijuana equipment financing can address both of these needs. 

When you work with the right lender, your business can adapt to a changing marketplace. Your new equipment can introduce you to new product lines and help you implement a new marketing plan or run your business more efficiently. If you’re looking for a basic way to expand your cannabis business, apply for a cannabis business loan today.

Frequently Asked Questions

Q: How hard is it to get a loan for equipment?

Most traditional lending institutions don’t work with cannabis companies. For that reason, cannabis business owners may face challenges in securing equipment financing. But if you partner with a dedicated cannabis lender, an equipment loan will usually be easier to qualify for than a real estate loan or other loan type.

Q: What is a good rate for an equipment loan?

Equipment loan interest rates vary widely by lender and by your loan agreement — including your loan amount. The exact interest rate can range from 7% to 20%, so an interest rate in the single digits would be ideal for a cannabis business. Remember to compare lenders to find the best possible deal.

Q: What is the average term of an equipment loan?

Equipment loan terms vary by lender and loan amount. A good target would be 12 to 18 months because it would help keep your monthly payments to a minimum while also preventing you from taking on long-term debt.

Financial services like loans and bank accounts are important for any business, and the cannabis industry is no exception. 

Although cannabis is rapidly gaining legal status throughout the U.S., it remains illegal at the federal level. This puts up a lot of roadblocks to obtaining CBD business loans, in many states, even if you follow regulatory requirements.

What options are available when you need a CBD business loan? Here’s what you should know.

The Landscape of the CBD Industry

Since California became the first state to legalize medical marijuana in 1996, several states followed suit, with the legalization of recreational cannabis gaining speed as well. To date, 38 states have enacted laws to allow medical marijuana use, along with three territories and the District of Columbia.

In addition, 23 states, two territories and Washington, D.C., have passed legislation to allow recreational cannabis use. More importantly, hemp CBD and hemp-derived products gained federal legalization with the passage of the 2018 Farm Bill, which allows the cultivation, production, distribution, possession and transportation of hemp cannabis featuring 0.3% of THC or less.

While the landscape for cannabis legalization continues to expand, creating new opportunities for businesses to succeed, it can still be challenging to secure a CBD business loan. This is why it’s so important to find the right lender.

How Do CBD Business Loans Work?

Even though the cannabis industry is thriving, established banking institutions remain hesitant to wade into the lucrative waters of CBD business loans because of the potential risks of legal liability. This leaves many cannabis businesses to operate in cash, limiting growth opportunities.

What’s the solution? While banking institutions may not offer the services cannabis businesses need, nontraditional lending can bridge the gap. You just have to find the right resources so you can connect with reliable lenders.

There are many different lending options, from working capital CBD business loans that help with cash flow and funding day-to-day operations to more significant lending that allows your business to expand to new locations and markets. 

The right lender will tailor solutions to your needs with a range of available terms for loan type, amount, duration and interest rate and no requirements for collateral.

What Can CBD Business Loans Be Used For?

Generally, a business loan can be used for a wide range of expenditures related to your operations. You may turn to lending to manage cash flow when your business experiences seasonal ups and downs. You might need a short-term cash infusion for equipment financing.

You could try invoice financing, using your outstanding invoices to secure an accounts receivable line of credit that keeps you in operation until you receive owed payments from clientele. 

If you’re ready to expand, a bridge CBD business loan can get you into new locations. A suitable lender will work with you to arrange for the financing that helps you meet specific business goals.

Scaling Your CBD Business for Success

Cannabis is a big business, which means there are plenty of opportunities to grow a small operation. With access to lending and banking solutions, you can take steps to remain competitive in a market that continues to expand.

Scaling your business could require a range of integrated strategies. In addition to focusing on successful marketing campaigns, you might want to expand to new locations and even target new product markets.

As a cultivator or manufacturer, you might partner with dispensaries to distribute your goods. You could also create CBD products for pets and connect with retailers in pet supply. You might try your hand at e-commerce, cutting out the middleman and selling directly to consumers online.

The point is that there are several options to explore when expanding your business and taking advantage of a growing market. If you want your business to thrive, you must remain competitive rather than resting on your laurels.

An Ever-Changing Market

With the passage of the 2018 Farm Bill, the market for hemp CBD exploded, along with research and a resulting slate of new product types. Hemp derivatives from Delta-8 and Delta-10 THC to HHC have gained popularity among consumers. They’ve also spurred restrictions in some states.

Cannabis legalization at the state level continues, and a bill to decriminalize marijuana at the federal level (H.R.3617) is under review by Congress. It’s not always easy for cannabis businesses to keep up with rapidly changing laws, but it is important.

As a business owner, you naturally want to remain in compliance with local, state and federal legislation. When you understand the legal landscape surrounding cannabis, you can keep operations running smoothly and take advantage of growth opportunities.

Gain Access to the Necessary Funding for Your CBD Business

While most business owners can comparison shop at local banks to find the financial services that best suit their needs, cannabis companies are far more limited when it comes to lending. 

This dilemma is where a select partner like Canna Business Resources comes into play, with innovative, full-service business solutions designed to drive performance.

Funding is essential for any business, but in the cannabis industry, where growth is rampant, it’s critical for those interested in taking advantage of opportunities to expand. 

You need access to the right type of business loan at the right time, whether you’re seeking $50,000 in working capital to even out your cash flow or $5 million for a massive expansion. Tailored solutions can help your business get through a rough patch or scale rapidly.

Business Funding That Fits Your Needs

Traditional lending is not an option for many cannabis businesses. With changing legislation that varies from state to state, lending institutions are simply unwilling to take risks. That said, you can find solutions that help you achieve your business goals.

With the right CBD business loan from a reliable lender that specializes in funding cannabis companies, you can purchase needed equipment, manage your cash flow, expand operations and find financing solutions that perfectly suit your needs.

Frequently Asked Questions

Q: Can you get a business loan for a dispensary?

Whether you’re a cultivator looking to open a dispensary location or you’re a retail business interested in expanding to new areas, you may need a short-term commercial real estate financing option to help you manage the added expense until you get your new location up and running. When obtaining a business loan for a dispensary, make sure you understand options for loan amount, duration and interest rate so you can find the best solution for your needs.

Q: Where can you apply for cannabis business loans?

Whether you need a few thousand dollars to update your equipment, you’re seeking several million to open additional locations or launch new product lines or you’re interested in wide-ranging financing options and merchant services, reaching short- and long-term business goals starts with securing funding. By simply answering a few questions about your business, revenue, credit score and monetary needs, you could receive instant financing options. All you have to do to get started is apply now.

Q: Who qualifies for a business loan?

To determine whether you qualify for business financing, you’ll provide standard information about your business. Have you been in operation for one or two years, over 10 or somewhere in between? Is your annual revenue in the tens of thousands or significantly more? What’s your credit score? What do you need the money for? With this information, a lender can quickly determine your eligibility.

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.

Running a cannabis-related business presents unique challenges, especially when it comes to managing inventory and supplies. You’ll often find yourself needing to secure a significant amount of inventory well in advance of potential sales. But unlike businesses in other industries, cannabis entrepreneurs face a major obstacle — federal regulations prevent them from easily obtaining traditional bank loans or lines of credit.

The cannabis sector is characterized by explosive growth, complex regulations and a constantly shifting market landscape. To not just survive but thrive in this demanding environment, businesses often require a financial solution that goes beyond the conventional. This is where cannabis inventory loans come into play.

These loans aren’t just a matter of convenience, they’re a strategic necessity. In an industry where staying ahead of demand is critical, cannabis inventory loans offer the essential capital needed to strengthen and streamline inventory management. 

How Do Cannabis Inventory Loans Work?

Cannabis inventory loans are specialized financial instruments designed to address the challenges faced by businesses operating in the cannabis industry. Their primary purpose is to provide the necessary capital for businesses to purchase and manage their inventory effectively.

Cannabis businesses often find themselves in a tough position because of a combination of factors. First, they operate in an industry characterized by rapid growth and fluctuating demand, making it important to maintain a well-stocked inventory to meet customer needs. Second, the cannabis sector is illegal at the federal level, which means traditional bank loans or lines of credit are typically not accessible because of restrictions. Cannabis is still classified as a Schedule 1 controlled substance.

How Cannabis Inventory Loans Differ from Traditional Bank Loans

Cannabis inventory loans offered by specialized lenders like Canna Business Resources fill a major financial gap for cannabis business owners. These loans stand apart from traditional bank loans in several significant ways:

Regulatory compliance: Cannabis inventory loans are tailored to meet the industry’s regulatory challenges. They help businesses stay compliant with strict laws and reporting requirements.

Collateral: Traditional bank loans often require substantial collateral, which cannabis businesses may struggle to provide because of the legal ambiguity surrounding their assets. Cannabis inventory loans are often secured by the inventory itself, making them more accessible to cannabis business owners.

Speed and accessibility: Traditional bank loans can be time-consuming to secure with extensive documentation and underwriting requirements. In contrast, inventory loans for cannabis businesses are typically faster to obtain, helping companies respond swiftly to market dynamics.

Flexible repayment: Cannabis inventory loans often come with more flexible repayment terms, accommodating the seasonal and sometimes unpredictable cash-flow patterns of the cannabis industry.

The Importance of Inventory Management in the Cannabis Industry

Cannabis inventory loans provide businesses with the working capital needed to navigate the complexities and challenges of the industry.

Meeting fluctuating demand: The cannabis industry often experiences unpredictable shifts in demand, driven by factors like changing consumer preferences, regulatory changes or seasonal variations. Inventory loans offer a lifeline by providing the necessary working capital to ensure businesses can adapt to these fluctuations without running out of stock during high-demand periods or sitting on excess inventory during slow periods.

Regulatory compliance: Regulations surrounding the cannabis industry require meticulous tracking, reporting and security measures. Maintaining compliance can be resource-intensive, and noncompliance can result in severe penalties or loss of licenses. Inventory loans empower businesses to invest in robust inventory tracking and management systems, ensuring they meet regulatory requirements consistently.

Quality control and product testing: Cannabis products must undergo rigorous testing and quality control measures to ensure safety and potency. Failing tests or product recalls can disrupt operations and damage a brand’s reputation. Inventory loans provide the financial flexibility needed to implement and maintain essential quality control measures, reducing the risk of costly setbacks.

Product shelf life management: Many cannabis products have a limited shelf life, especially edibles and concentrates. Managing inventory effectively to prevent product spoilage and losses resulting from expired goods is a constant challenge. Inventory loans enable businesses to rotate their stock efficiently, ensuring that older products are sold first and minimizing waste.

Supply chain optimization: Efficient inventory management involves maintaining the right stock levels and optimizing the entire supply chain. Inventory loans offer the financial resources to purchase inventory in bulk, taking advantage of volume discounts and reducing the overall cost of goods sold. This cost-effective approach can significantly enhance a business’s competitiveness in a market with thin profit margins.

Benefits of Cannabis Inventory Loans

Some of the numerous benefits of cannabis inventory loans include: 

Purchasing Power

Having purchasing power is a game-changer for cannabis businesses. Here’s why:

Competitive edge: In the fast-paced cannabis market, being able to secure the inventory you need promptly is a competitive advantage. You can respond swiftly to changing consumer preferences, seasonal trends or emerging products, ensuring your business remains attractive to customers.

Volume discounts: Purchasing in bulk often results in cost savings. With strong purchasing power, you can negotiate better terms with suppliers, ultimately reducing your cost per unit and improving your profit margins.

Product variety: A well-stocked inventory allows you to offer a wide variety of products, catering to diverse customer preferences. This breadth of choice attracts new customers and retains loyal ones.

Consistency: Having consistent access to inventory ensures you can meet customer expectations consistently. This reliability builds trust and fosters customer loyalty.

Cash Flow

A healthy cash flow is the lifeblood of any business, and it’s especially crucial in the cannabis industry. It helps with:

Business viability: Positive cash flow is essential for keeping your cannabis business operational. It covers day-to-day expenses, such as payroll, utilities and rent, ensuring your business stays afloat.

Growth opportunities: A strong cash flow position allows you to seize growth opportunities as they arise, whether it’s expanding your product line, opening new locations or investing in marketing campaigns.

Stability: Cannabis businesses often face unpredictable cash flow patterns resulting from payment delays and seasonal demand fluctuations. Maintaining a healthy cash flow provides stability and the ability to navigate these challenges effectively.

Crisis resilience: In times of unexpected crises, such as regulatory changes or economic downturns, a steady cash flow cushion can help your business weather the storm and emerge stronger on the other side.

Meeting Customer Demand

The crux of success in the cannabis industry lies in meeting customer demand. The prompt satisfaction of customer needs enhances their overall satisfaction and lays the foundation for building unwavering loyalty. Happy and content customers are more likely to return for repeat purchases and, equally important, become advocates for the business, actively recommending it to others. This advocacy is a priceless asset in an industry where positive word of mouth carries substantial weight.

Flexible Repayment Options

Inventory loans often come with flexible repayment options, further enhancing their suitability for cannabis businesses. These options typically align with the cash flow patterns of the cannabis industry, allowing businesses to manage repayments in a way that minimizes financial stress and maximizes operational efficiency. This flexibility is a valuable asset in an industry marked by regulatory challenges and market variability.

Understanding the Eligibility and Application Process

The specific eligibility criteria and application process may vary depending on the specialized lender, but generally, to qualify for cannabis inventory loans, businesses typically need to meet the following criteria:

Legal compliance: The business must be operating legally within the jurisdiction it serves, holding all necessary licenses and permits. This includes compliance with local, state and federal cannabis regulations.

Financial stability: Lenders often require businesses to demonstrate financial stability through a positive credit history, a viable business plan and a history of revenue generation.

Inventory management: A solid inventory management system is crucial. Businesses should be able to demonstrate their ability to effectively track, manage and rotate inventory to minimize waste and optimize stock levels.

Collateral: Some lenders may require collateral to secure the loan, such as inventory, equipment or property. The type and value of collateral can vary depending on the lender and the loan amount.

Typical Documentation Required During the Application Process

When applying for cannabis inventory loans, businesses should be prepared to provide the following documentation:

Business plan: A comprehensive business plan outlining the company’s objectives, market analysis, financial projections and inventory management strategies.

Financial statements: This includes balance sheets, income statements and cash flow statements, typically for the past two to three years.

Tax returns: Personal and business tax returns for the previous few years.

Legal documents: Copies of all licenses, permits and registrations required to operate legally in the cannabis industry.

Inventory records: Detailed records of current inventory levels, turnover rates and product shelf life management procedures.

Credit history: Personal and business credit reports may be required, along with information on outstanding debts or loans.

Bank statements: Recent bank statements to demonstrate the business’s financial health and cash flow.

Collateral documentation: If collateral is required, documentation proving ownership and value of the collateral, such as property deeds or equipment appraisals.

Tips for Maximizing Chances of Loan Approval

1. Prepare a solid business plan: A well-structured business plan provides a road map for your business and demonstrates your commitment and seriousness to potential lenders.
2. Maintain good financial records: Keep accurate and up-to-date financial records to showcase the financial health of your business. This includes thorough bookkeeping, tax compliance and regular financial statements.
3. Compliance is key: Ensure that your business is fully compliant with all local, state and federal cannabis regulations. Any compliance issues can be a red flag for lenders.
4. Build strong credit: Both personal and business credit histories can impact your loan approval. Make efforts to maintain good credit and resolve any outstanding issues.
5. Establish relationships: Build relationships with lenders who are familiar with the cannabis industry. They may have a better understanding of the unique challenges and opportunities in the market.
6. Collateral consideration: If collateral is required, carefully assess the assets you’re willing to put up as collateral. Be sure you understand the potential risks involved in case of default.
7. Seek professional advice: Consult with financial advisers or legal experts who specialize in the cannabis industry. Their expertise can help you navigate complex regulations and lending requirements.

Optimize Your Cannabis Inventory Management

Cannabis inventory loans provide a valuable resource for cannabis businesses looking to improve their inventory management practices. These loans can make a significant difference in how businesses handle their stock effectively and efficiently.

Ready to enhance your inventory management and propel your cannabis business to new heights? Canna Business Resources is your trusted partner in securing inventory loans tailored to your unique needs. Our experienced team understands the nuances of the cannabis industry, making the application process smooth and efficient.

Contact us today to explore how Canna Business Resources can provide the financial support you need to conquer inventory management challenges and achieve success in the cannabis industry. Your inventory loan journey starts here.

Frequently Asked Questions

Q: Can I get a loan on cannabis inventory?

Yes, you can secure loans specifically for cannabis inventory through various lenders.

Q: How does a business loan for inventory affect taxes?

 Business loans for inventory generally do not directly impact your taxes; they are considered a liability and not taxable income.

Q: How much does inventory financing cost?

The cost of inventory financing varies depending on factors like the lender, loan terms and your creditworthiness. Interest rates and fees will determine the overall cost.

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

Are you running a cannabis business and looking to expand or invest in new equipment? Canna Business Resources understands that equipment costs in the cannabis industry can be substantial, with estimates suggesting that lighting alone costs as much as $500,000. 

Canna Business Resources (CBR) is here to help. Our business equipment loans are designed to make acquiring the necessary equipment for your cannabis business more accessible and manageable. This article explores the advantages of these loans and how they can benefit your cannabis business. 

What Is Business Equipment Financing?

As the cannabis industry expands to meet the growing needs of patients and consumers, businesses and growers often require new equipment and upgrades to improve efficiency and production. The problem is that cannabis is still illegal at the federal level so traditional banks can’t offer financing for cannabis businesses. One essential tool on this growth journey is business equipment financing. Specialized lenders like Canna Business Resources, offer financing to help cannabis businesses succeed.

Key features of business equipment financing for cannabis include:

• Competitive terms: Business equipment financing typically offers flexible repayment terms, allowing businesses to choose a time frame that suits their financial situation. Terms can range from 12 to 60 months or more, providing ample flexibility.
• Loan amount: The amount you can secure through equipment financing varies but typically ranges from $100,000 to several million dollars, depending on your business’s needs and creditworthiness.
• Quick access to funds: In many cases, you can secure equipment financing relatively quickly, often within a few days. This swift access to funds is crucial for cannabis businesses looking to expand or upgrade their equipment promptly.
• Wide applicability: Equipment financing can be used for a variety of purposes in the cannabis industry. This includes acquiring extraction equipment, upgrading HVAC systems, purchasing kitchen equipment or investing in construction related to cultivation facilities.

Importance of Equipment in the Cannabis Industry

Equipment plays a vital role in the success of cannabis businesses across various segments of the industry, including cultivation, extraction, and manufacturing. Read on to learn why equipment is crucial.

Specialized Equipment for Cultivation

Precise growing conditions: Cannabis cultivation requires precise control over environmental factors like temperature, humidity and lighting. Specialized equipment, such as climate control systems and high-intensity lighting, ensures optimal growing conditions.

Maximized yields: Advanced equipment helps growers maximize crop yields, producing high-quality cannabis products that meet market demand.

Extraction Equipment for Product Manufacturing

Efficient extraction: Extracting cannabinoids and terpenes from cannabis plants requires specialized equipment like CO2 extractors and ethanol extraction systems. Efficient extraction processes are essential for creating concentrates and oils used in various products.

Product consistency: Quality extraction equipment ensures consistency in product formulations, crucial for meeting consumer expectations.

Manufacturing Equipment for Product Creation

Product diversification: Cannabis businesses often expand their product lines to include edibles, topicals and other goods. This requires manufacturing equipment like commercial kitchens, infusion machines and packaging systems.

Compliance and quality: Regulatory compliance and product quality are paramount. Proper equipment helps in adhering to safety and quality standards.

What Cannabis Equipment Loans Can Be Used For

Cannabis equipment loans are a versatile financial tool that empowers businesses in the cannabis industry to enhance their operations in several key areas.

1. Cultivation

Large-scale cultivation projects: Cultivating cannabis on a large scale demands precision and efficiency. Equipment loans can finance the acquisition of essential tools and systems, such as high-intensity lighting and environmental control systems, to optimize plant growth. These tools provide a competitive edge in a competitive market.

2. Extraction

Cannabis extraction equipment: The extraction process is fundamental in producing concentrates and oils. With equipment financing, you can secure cutting-edge extraction machinery, ensuring efficient extraction methods. Staying up to date with the latest extraction technology enhances product quality and yield.

3. Manufacturing and Processing

Kitchen and storage equipment: As you expand your product offerings, you may need modern kitchen equipment for edibles or storage solutions to accommodate larger volumes. Equipment loans enable you to invest in next-generation equipment with longer usable lives, supporting your growing product line.

4. Building and Construction

Cultivation facility construction: Building or renovating cultivation facilities is a significant undertaking. Cannabis equipment loans can be applied to cover the costs associated with constructing compliant and efficient cultivation spaces, including HVAC systems, lighting and security measures.

5. Hybrid Solutions

Cannabis growing supplies: Some equipment financing options offer hybrid solutions, combining equipment loan benefits with working capital lending capabilities. This ensures that you have the necessary supplies and resources for your cultivation operations, optimizing both equipment and ongoing expenses.

Benefits of Business Equipment Loans for Cannabis Businesses

The cannabis industry is competitive, so businesses must seize every opportunity to thrive. Equipment plays a pivotal role in achieving operational excellence, and cannabis equipment loans are a valuable resource for businesses looking to invest in their future. Take a look at the compelling benefits of these loans.

Streamlined Application Process

Unlike traditional financing, equipment loans often require less paperwork and boast a quicker approval timeline. This efficiency enables business owners to access much-needed funds swiftly, keeping pace with the industry’s rapid developments.

Flexible Repayment Terms

Equipment loans provide flexibility in terms of repayment, allowing businesses to choose a timeline that aligns with their financial goals. Longer repayment terms can ease the financial burden, ensuring that monthly payments are manageable and freeing up capital for other critical expenditures.

Acquisition of Advanced Technology

Equipment loans empower businesses to acquire the latest equipment, enhancing efficiency, product quality and overall competitiveness. By investing in advanced technology, cannabis businesses can position themselves as industry leaders and meet the ever-evolving demands of consumers.

Preservation of Working Capital

One of the most significant advantages of equipment loans is the preservation of working capital. Rather than tying up substantial sums in equipment purchases, businesses can maintain liquidity for day-to-day operations, marketing efforts, and expansion initiatives. This financial flexibility is vital in a dynamic industry where adaptability is key to success.

Possible Tax Benefits

Equipment financing may offer potential tax benefits, such as depreciation deductions. However, it’s crucial for business owners to consult with tax professionals to fully understand the tax advantages available. Seeking professional tax advice ensures that you make informed financial decisions and maximize your potential tax savings.

Cannabis Equipment Financing vs. Cannabis Equipment Leasing

Cannabis equipment leasing is another option, but in the long run, this might not be the best option. There are some key differences between equipment financing and equipment leasing. 

Ownership

Equipment financing: With equipment financing, you gain full ownership of the equipment from the outset. The equipment becomes a tangible asset on your balance sheet, and you’re responsible for its maintenance, insurance and any associated costs.

Equipment leasing: In contrast, equipment leasing is more akin to a rental arrangement. You have the right to use the equipment, but you don’t own it. The lessor retains ownership, and you typically return the equipment at the end of the lease term or have the option to purchase it.

Monthly Payments

Equipment financing: When you choose equipment financing, your payments are typically higher than leasing. However, these payments contribute to your ownership stake in the equipment. Once the loan is paid off, you own the equipment.

Equipment leasing: Lease payments are generally lower than financing, as they cover the equipment’s use but not its full cost. This can help with short-term cash flow but doesn’t build equity in the equipment.

Flexibility

Equipment financing: Financing offers flexibility in terms of customization. You can often structure the loan to align with your cash flow, choosing the loan term and monthly payment that suits your financial situation.

Equipment leasing: Leasing agreements are typically less flexible. You must adhere to the terms outlined in the lease contract, which may include restrictions on equipment modifications or usage.

End of Term Options

Equipment financing: At the end of the financing term, you own the equipment, and it’s yours to keep or continue using as needed. You have no further financial obligations.

Equipment leasing: At the end of a lease, you typically have several options — return the equipment, purchase it at fair market value or renew the lease. The flexibility of the lease’s end-of-term options can be an advantage for some businesses.

Tax Implications

Equipment Financing: Interest and depreciation on equipment loans may offer potential tax benefits. You can deduct interest expenses and depreciate the equipment’s value over time, potentially reducing your taxable income.

Equipment leasing: Lease payments are generally considered operational expenses and may be tax-deductible. But you don’t benefit from equipment depreciation because you don’t own the equipment.

Long-Term vs. Short-Term Needs

Equipment financing: Financing is ideal for businesses with long-term equipment needs and those looking to build equity in their assets over time.

Equipment leasing: Leasing is suitable for businesses with short-term equipment requirements or those that prefer regular equipment upgrades without the responsibility of ownership.

Unlock Your Cannabis Business’s Full Potential

As the cannabis industry evolves, having the right equipment can be your ticket to success. So, don’t just survive – thrive! Reach out to Canna Business Resources today to explore your equipment financing options. 

Frequently Asked Questions

Q: How hard is it to get a loan for cannabis equipment?

It can be challenging because of federal regulations, but specialized lenders like Canna Business Resources can help.

Q: Can cannabis businesses deduct the interest on financing equipment?

In some cases, yes. Consult with a tax professional to understand the specific tax benefits available to your business.

Q: What credit score is needed for an equipment loan from Canna Business Resources?

Credit score requirements vary, but typically, a higher credit score improves your loan eligibility and terms. Contact us for specific details.

Marijuana Dispensary Loans: Funding Options for Established Businesses

Growing a business is never an easy task. But when you operate a cannabis business, you face challenges unique to your industry. Traditional lenders won’t be a funding option to expand your business. But many specialized lenders provide dispensary loans to help you scale your business.

What Are Marijuana Dispensary Loans?

As the name suggests, dispensary loans are a type of loan that can be used to launch, maintain or expand a cannabis dispensary. The business loans can be used to fund business expenses that range from:

• Commercial real estate
• Inventory
• Equipment
• Operating expenses/working capital

For existing businesses, a dispensary loan can provide the funding you need to purchase a new product line, upgrade your equipment or implement a new marketing strategy. 

Dispensary loans are typically given in the form of term loans, which means you’ll receive the funds you need in one lump sum, then repay the loan along with any interest according to a predetermined payment schedule. 

The exact interest rate and loan terms are set by the lender, which is why it’s important to compare cannabis lenders before committing to a loan.

What Sets Cannabis Loans Apart From Others?

Even though recreational cannabis is now legal in 23 states and Washington, D.C., banks and other traditional lenders have been slow to offer small-business loans to cannabis businesses. But that only creates an opportunity for cannabis lenders to offer a unique dispensary loan. 

Because of the legal restrictions that surround the cannabis industry, dispensary loans tend to have higher interest rates than other traditional loan types. But the advantage is that cannabis lenders understand the challenges cannabis business owners face and can work with you to provide the funding you need. 

Ultimately, this gives you access to funding when other lenders give you the brush-off. And for growing businesses, cannabis lenders can connect you to the funding you need for cannabis-related business expenses.

Common Types of Dispensary Loans

Not all cannabis loans are created equal. You can match your dispensary loans to your specific business needs. Here are some of the most common types of cannabis business loans.

Working Capital

Working capital loans provide the funding you need to maintain your day-to-day business operations. This can include things like:

• Utilities, rent and other short-term bills and expenses
• Sales and marketing
• Wages
• Short-term investments

A working capital loan isn’t designed for long-term growth, but it can provide the necessary cash flow to keep up with your ordinary transactions. 

For growing businesses, this also means that your working capital funding will alleviate pressure on your long-term savings, giving you an immediate source of cash to draw from so you can leave your long-term assets untouched.

Equipment Financing

An equipment financing loan can be ideal for dispensary owners looking to purchase new point-of-sale equipment, office computers and more. 

For example, as you grow you might need a dedicated workspace to handle your administrative tasks. You can use an equipment loan to purchase computers and other office equipment — even additional office furniture.

Growing dispensaries might also use an equipment loan to augment their point-of-sale equipment, and some lenders let you use equipment loans to fund HVAC systems or other major machinery to improve your retail environment. 

Depending on your lender, you may need to specify your intended expenses, but you should have no problem in securing cannabis business loans for these common needs.

Inventory Financing

While some types of working capital loans can cover inventory, some lenders offer a dedicated form of inventory financing. An inventory financing loan can be used to purchase additional inventory, which makes it ideal for cannabis business owners who anticipate a period of increased sales volume.

Existing cannabis businesses might also consider an inventory financing loan to expand their product lines, either by upgrading their existing inventory or by acquiring new products. Inventory loans help your business stay fresh, which keeps your customers coming back rather than migrating to your competitors.

Real Estate Loans

Real estate loans can be used to purchase or upgrade a cannabis retail business. When you first launched your cannabis business, you may have used a real estate loan to purchase your commercial space. Now that you’re growing, you might consider real estate funding to purchase new retail locations and open multiple storefronts in your community.

But real estate loans are not restricted to purchasing new property. This type of business financing can also be used to pay for remodels and upgrades. Keep in mind that these loans tend to be a larger amount than other loan options — that’s all the more reason to compare lenders to find the best rates and terms.

AR Financing

Accounts receivable (AR) financing is a specialized form of business financing that lets you obtain a loan or business line of credit using your unpaid invoices as a form of collateral.

AR financing gives you quick access to cash that can be used for a variety of purposes, not unlike working capital loans. This is also a great way to avoid taking on excess debt because your accounts receivables serve as collateral and keep interest rates low. 

But the loan amount tends to be limited based on the volume of your past invoices. AR financing is also not a wise choice if you struggle with a lot of unpaid invoices, which means that you may not be able to access a large amount of funds.

ERC Bridge Loans

The Employee Retention Credit (ERC) enables businesses to cover payroll, but the credit itself isn’t received until the IRS processes the claim. This means that cannabis business owners still have to pay their employees and only later collect the ERC. 

A cannabis bridge loan will basically serve as an advance on this money, and you’ll repay the loan (with interest) once you officially receive the credit.

This is a great way to gain quick access to funds to cover one of your biggest operating expenses: payroll. But remember that you’re attaching interest charges when you pursue a bridge loan. Make sure you compare lenders so you’re getting the best possible deal.

Why Choose Canna Business Resources as Your Cannabis Financing Solutions?

Canna Business Resources understands the challenges facing cannabis business owners. If you’ve been struggling to find funding through traditional small business lenders, you can always turn to a company that specializes in lending options for the cannabis industry.

At Canna Business Resources, you’ll find dispensary loans, equipment loans, working capital loans and other funding types to help you fuel your business growth. And working with a company that is focused on the cannabis industry can give you guidance on how to make the most of your expanding business.

Cultivating Your Business

The seeds of your business were planted on the day you opened your doors. Now that you’re growing, you need access to additional capital to cultivate the future of your business. Dispensary loans empower you to reach your full potential as a business leader and succeed in today’s growing cannabis industry.

Frequently Asked Questions

Q: Can you get a business loan for a dispensary?

Yes. While banks and traditional lenders don’t typically offer cannabis loans, you can still find dispensary loans from a dedicated cannabis lender.

Q: How do you get a business loan for a dispensary?

To obtain cannabis funding, you must apply for a business loan from a cannabis lender. Lenders expect to see your business plan and review your financial history, but you can receive funding for a variety of business needs.

Q: Are dispensary loans easy to get?

Yes and no. On the one hand, they’re not as easy to get as other forms of business financing because of regulations that surround the cannabis industry. But a dedicated cannabis lender will understand your requirements and provide access to the capital you need to grow.

• The business was fully or partially suspended because of government orders related to COVID-19. For instance, if lockdown measures required a cannabis dispensary to temporarily close or reduce operations, it would likely meet this criterion.
• The business experienced a significant decline in gross receipts. If the business’s gross receipts for a calendar quarter in 2020 or 2021 were less than 50% of the gross receipts for the same quarter in 2019, it may be eligible. This decline in revenue could be the result of reduced sales or other disruptions caused by the pandemic.

• For businesses with fewer than 100 full-time employees, all wages paid during the eligible periods qualify, whether the employees were working or not.
• For larger employers — those with 100 or more full-time employees — qualified wages are limited to wages paid to employees who are not providing services because of COVID-19-related circumstances.

The old saying is true: It takes money to make money. As a cannabis business owner, you likely discovered that fact when you first opened your doors. But now that your business is flourishing, it may be time to consider a working capital loan to fuel your expansion.

Working capital loans provide fast, flexible financing to fund just about any aspect of your business. They’re typically a better — or at least more immediate — option than traditional loan programs, making them ideal for growing cannabis businesses.

What Is a Working Capital Loan?

A working capital loan (sometimes called a cash-flow loan) is a funding option that can be used to fund your business’s day-to-day operations. The loans are intended to provide a business with additional cash flow to fund short-term obligations or cyclical sales trends.

While a working capital loan isn’t designed to fund long-term projects, it can still be invaluable for small-business owners who need additional help in paying for operational expenses such as inventory, payroll or rent. But its flexibility also allows you to allocate resources to cover business expansion projects.

How Does a Working Capital Loan Work for Cannabis Businesses?

Working capital loans can typically provide faster funding than other types of business financing. That’s especially true because cannabis business owners can’t get loans from traditional lenders as cannabis is illegal at the federal level. 

A working capital loan can ensure that businesses receive the funding they need to cover their operational costs. Growing businesses may need additional working capital to purchase new equipment, hire additional staff or take advantage of cyclical sales trends by investing in additional inventory.

Benefits of Working Capital Loans for Cannabis Businesses

Cannabis business owners can benefit from access to a flexible small-business loan option. Working capital loans offer several advantages, including:

Business Expansion

The most immediate benefit of a loan is that it provides for your working capital needs so you can focus on expanding your business. That’s because working capital loans help with your everyday operational expenses, freeing up money that can be used to seize new business opportunities.

For example, if you’re interested in purchasing additional sales equipment or retail space, you’ll need to have the funds available. Sure, you can apply for a traditional cannabis loan, but a working capital loan can offer fast approval so you can take advantage of opportunities as they arise and beat the competition.

Inventory Management and Hiring

Working capital loans are designed to fund your most regular operating expenses, so they’re perfect for covering expenses like inventory and payroll. Some cannabis business owners discover cyclical trends, such as 4/20 sales. Having the business capital to invest in additional inventory during busy seasons can help you maximize your revenue.

Similarly, you can use a working capital loan to hire additional staff. This might be a great way to hire more employees for a growing business, then pay their salary once your revenue picks up. But you might also use the loan to cover contractors who assist with things like remodeling, web development or other growth-related projects.

Flexibility to Adapt to Market Changes

Business costs can be unpredictable no matter what industry you’re in. But cannabis business owners face unique challenges because of their limited options for inventory, supplies or creating an emergency fund.

Inflation hits every business hard. But while other businesses can turn to a traditional bank or lender for support, cannabis businesses don’t have that option. A working capital loan can provide the funding needed to react quickly to changes in the market or the broader economy.

Quick Approval and Funding

Because working capital loans generally offer a smaller loan amount than a typical term loan, the eligibility requirements are more straightforward. Credit score requirements also can be lower, depending on the lender. 

After a quick review of your finances and your credit history, you can receive fast approval — the money will often be available within 24 to 48 hours. But make sure to check the terms and conditions. Some lenders tie the loan to your personal credit, which can leave you on the hook if you fail to repay it.

Simple Loan Application

If you’ve ever applied for a term loan, you know that the application process can be a bit daunting. Most lenders expect to see your business plan and financial statements from the previous two months or longer.

Working capital loans offer a simpler loan process, which means that securing funding will be less labor-intensive than other loan programs. And after a credit decision from the lender, your funds will be available within 24 to 48 hours, if not sooner.

Finding the Right Cannabis Lender 

Finding the right lender can be challenging. Banks and traditional lenders don’t typically lend to cannabis businesses. That’s why it’s vital to find a cannabis lender that understands the needs of the cannabis industry.

To find the right lender, look for a company with experience and a solid track record. And always compare the interest rates and loan terms of at least three different lenders so you can make sure you’re receiving the best deal. Don’t forget to check for any hidden fees that can add to the cost of your loan.

Alternatives to Traditional Working Capital Loans

While working capital loans offer the most flexibility, cannabis business owners might also consider other loan programs, such as:

Equipment Loans

Equipment loans can help you finance additional business equipment and technology, though they won’t offer the same flexibility as working capital loans to purchase inventory or hire employees.

Accounts Receivable/Invoice Line of Credit

This method lets you borrow money from your accounts receivable for fast funding. It also provides flexible funding, though a working capital loan can provide a fresh cash flow without borrowing from your own business.

Dispensary Loans

Dispensary loans can also fuel business growth and be used to fund equipment, inventory and real estate. The downside is that these tend to be larger term loans, which means that they can be harder to get than a simple, flexible working capital loan.

Flexible Financing for Growing Businesses

With cannabis businesses on the rise, entrepreneurs need flexible financing solutions to adapt to changing market conditions and stay ahead of the growing competition. According to financial data reported by the U.S. Securities and Exchange Commission,  the industry is expected to earn over $31 billion by 2024. This shows the importance of being able to adapt to changing needs.

With a working capital loan, you’ll achieve a dependable, flexible solution that empowers you to cover your operating expenses while accelerating your business growth. The right lender can help you meet your needs for today while driving yourself into the future.

Frequently Asked Questions

Q: Are working capital loans a good idea?

Working capital loans offer a flexible way to cover your operating expenses while also working toward future growth. Just be aware that some lenders tie the loan to your personal credit, which could mean you’re personally liable if you don’t repay the loan.

Q: What percentage of businesses use working capital loans?

Exact data on working capital loans isn’t readily available, though the Federal Reserve reports that 45% of businesses use lending options to address funding needs.

Q: Why do people get working capital loans?

Business owners most often get working capital loans to cover operating expenses, but they also use the loans to address seasonal trends in their business or to provide cash flow for expansion projects. The advantage is that working capital loans are flexible — you can use them for a variety of business purposes.

The COVID-19 pandemic created a rift between essential and nonessential businesses. Essential businesses struggled, and nonessential businesses are still trying to get back on their feet. Some business owners are exploring the benefits of an Employee Retention Tax Credit (ERTC) loan to do so.

ERTC loans may be suitable for certain types of operations, but can you use this funding option to keep your cannabis business afloat? Perhaps surprisingly, the answer is yes.

Learn about your eligibility and how to secure funding for your cannabis company.

Understanding the Employee Retention Tax Credit (ERTC)

The Employee Retention Tax Credit (ERTC), or Employee Retention Credit (ERC), is a part of the Coronavirus Aid, Relief and Economic Security (CARES) Act passed in March 2020. During that time, businesses were forced to shut down to contain the spread of the coronavirus. The ERTC program was designed to provide for employee wages during this period.

Is the ERTC program still available? Yes. Small-business owners may still apply for ERTC loans. That includes cannabis companies, many of which were shut down as nonessential businesses during the height of the pandemic.

The credit amount is based on your qualified wages. To determine your qualified wages, you’ll need to calculate the amount of time your business was suspended because of governmental orders. Alternatively, you can use the actual amount of loss as follows:

• For 2020, a quarter where gross receipts were less than half of 2019
• For 2021, a quarter where gross receipts were less than 20% of 2019

An ERTC loan can be used to cover all payroll costs during these periods, including wages and healthcare coverage.

It’s also important to distinguish the ERTC program from the Paycheck Protection Program (PPP), which was also aimed at assisting businesses during the pandemic.

PPP loans were exactly that — financial aid sent to business owners as an advance payment for their payroll expenses. PPP loans had to be paid back. ERTC loans, on the other hand, are a type of tax credit and don’t have to be repaid.

Financial Challenges Faced by Cannabis Companies

Pandemic aside, cannabis business owners face challenges that are unique to their industry. Because the legality of cannabis varies on a state-by-state basis, banks and traditional lenders haven’t provided financing to cannabis businesses.

But the pandemic created additional challenges for cannabis business owners.

For instance, cannabis companies were excluded from the Paycheck Protection Program. While other businesses received advance payments from the government to retain their workers, cannabis businesses had to find funding elsewhere or dip into their own reserves.

Cannabis companies are still eligible for ERC/ERTC loans. This program offers alternative financing for cannabis businesses impacted by the 2020 lockdown. And because ERTC loans are a tax credit for money you’ve already spent on payroll, you can use your refund check for any business purpose you choose.

How Cannabis Companies Can Claim ERTC Relief

ERTC funding is available to any business that paid qualified wages to any or all of its workers between March 12, 2020, and Jan. 1, 2022. The ERTC loan can be used for any business that meets any of the following criteria:

• Was shut down by government order during 2020 or the first three quarters of 2021
• Experienced a qualifying decline in gross receipts during 2020
• Experienced a qualifying decline in gross receipts in the first three quarters of 2021
• Qualified as a recovery startup business during the third or fourth quarters of 2021

Once you determine your eligibility and calculate your qualified wages, you’ll need to file Form 941-X with the IRS. You’ll report qualifying earnings using this form.

You’ll also carry any unused tax credits forward to succeeding quarters and years, and you’ll claim a refundable tax credit if you file Form 941 on your income tax return for the following year.

Advantages of ERTC Loans for Cannabis Companies

Cannabis entrepreneurs can take advantage of ERTC loans as a business finance strategy. An ERC tax credit is intended to compensate you for the money you would have already spent on payroll costs. You can use the check you receive from the ERTC program to fund other areas of your business.

Existing business owners can use an ERTC loan to generate much-needed cash flow. The credit provides the necessary funding to purchase additional equipment, expand inventory or make other major purchases to expand operations.

This is important, as cannabis companies typically have limited funding options. The ERTC loan can be another source of working capital that can fuel your business and help you grow.

That doesn’t just benefit you. It’s also good news for your employees, who otherwise would have lost work and wages during the pandemic.

The Bureau of Labor Statistics reports that over 6 million Americans found themselves unable to work because of pandemic closures. The ERTC program can help you retain your valued workers for the long haul.

What You Need to Apply for ERTC Loans

Keep in mind that business owners can apply for ERTC loans for up to three years after the conclusion of the eligibility period. This means that businesses can apply for the ERTC program through January 2025, but it also means you’ll need to act quickly to claim the tax credits.

To apply, you’ll need to download and complete Form 941-X, Amended Quarterly Payroll Tax Return, with the IRS. The document will help you report your qualified wages based on gross receipts during the periods outlined above.

Some business owners may use a payroll processing service that makes filing for the ERTC even easier. If so, your payroll processor — or even your software — may offer an integrated solution to make the process even easier.

You can also improve your chances of success by retaining supporting documentation to demonstrate that you retained workers during the qualifying period and paid wages and/or healthcare benefits.

Keep Your Business Moving Forward

Keeping America employed is no easy task.

If your cannabis business retained workers during the height of the pandemic or shortly beyond, you’ve done something truly commendable. But you also need someone to support you. ERTC loans serve to ensure that your business is appropriately compensated for the wages you paid during the government shutdown.

For cannabis companies, that can be a valuable financial benefit. Because cannabis entrepreneurs were excluded from PPP loans and can only receive funding from nontraditional lenders, the ERTC program offers a reliable funding opportunity that can be used to support and grow your business.

The steps outlined above can help you take full advantage of the program and keep your business moving in the right direction.

Frequently Asked Questions

Q: Who qualifies for ERTC?

Businesses that employed workers during 2020 or 2021 can qualify for ERTC, provided they saw full or partially suspended business operations because of a government order or can demonstrate that they’ve experienced a significant decline in gross receipts compared to the same quarter in 2019.

Q: Is ERC a loan?

Despite their somewhat misleading name, ERTC loans technically aren’t loans — rather, they’re a type of tax credit.

ERTC loans are aimed at businesses that would have already covered payroll expenses during the pandemic and are now eligible to receive a credit. As such, they don’t need to be refunded, and the funds can be used for any current or future business expense.

Q: When does ERTC end?

Business owners can continue applying for the ERTC program for three years following the end of the qualifying period on Jan. 1, 2022, which means the program will remain open for new applicants until Jan. 1, 2025.