More and more businesses today are considering entering the cannabis market, as there is an increasing demand for cannabis grower loans. These loans basically provide the funding required for launching, as well as, developing entities that depend on cannabidiol, the non-psychoactive element found in the cannabis plant that offers numerous medical benefits. Like various other sectors of the cannabis business, CBD ventures are projected to experience significant and rapid growth starting this year.
Different Types of Hemp Financing Options Startups Should Consider
It is difficult to acquire any type of funding for a startup or even if you are considering expanding your cannabis-based venture. There is still a lot of red tape you’ll need to deal with while making loans in this industry as marijuana is still federally illegal. Until nationwide decriminalization takes place, conventional lenders will not offer marijuana loan. Nevertheless, there are some great options out there for dispensary loans, hemp financing, or any other type of weed loan.
- Bridge Loans
These loans are also known as ‘swing loans’, ‘gap financing’, or ‘interim financing’. A business can make use of these short-term loans while awaiting permanent financing solutions. They allow startups to fulfill their immediate financial obligations by typically come with higher interest rates. These loans mostly require collateral. The funding can be further used for inventory, rent, working capital, utilities, and other expenses that a business requires to cover quickly.
- Unsecured Loans
Unsecured means that you don’t have to attach any form of collateral such as property or assets. You also don’t need to prove income verification such as tax returns or paycheck stubs. Good personal credit is usually required. After all, the bank needs something to go on in order to trust you will pay back the loan. These types of loans are usually hard to find but the following two companies offer this program in the US only. https://startupcannabisloans.co and https://unsecuredbusinesslines.com
- Merchant Cash Advances
It is not really a loan. Rather, a (very expensive) viable funding option that has advanced to a merchant based on upcoming business debit and credit card transactions. These are short-term funding solutions that offer additional working capital to sustain a business via difficult financial situations but do not provide permanent funding options. This option mainly depends on consistent and strong revenue statements, proof of monthly income. Unfortunately, MCA’s carry extremely high interest rates.
- Alternative/Private Loan Options
Non-banking lenders are the most desired source of funding for CBD business loans and other types of hemp financing usually sought after within the cannabis industry. The private lenders come with their own set of requirements. Most want to see that a business is already up and running AND profitable. So this option is difficult for startup cannabis businesses to obtain. It is, therefore, crucial for startups to research the pre-requisites thoroughly before applying for the loan. Ensure that the lender you are considering for CBD business loans is interested to invest in a specific sector of the CBD industry that your venture serves and is ok with a business that has yet to prove itself.