The cannabis market is constantly expanding, with several states legalizing cannabis sales for both medical and recreational purposes. There is a lot of cannabis-specific information you should be aware of before applying for a cannabis loan.
Cannabis business loans are extremely tough to get, especially if you are a new company. Because cannabis is still classified as a Schedule 1 substance on the federal level, banks typically do not handle cannabis capital. Although large banks will not be able to finance your marijuana business, there are several other options. Before making a decision, take your time figuring out every company detail and conducting exhaustive research on the funding possibilities you are considering.
We’ve compiled the best cannabis business finance advice right here.
Securing A Cannabis Business Loan
A cannabis company loan is often made available by a private debt capital source that specializes in lending to the Marijuana, CBD, Hemp, Kratom, and Psychedelic businesses. Here are some things to know of for cannabis business financing.
Make the Best Cannabis Business Plan You Can
Gather financial statements from the previous few years, including checking, savings, and mortgage accounts. Present proof of concept and extensive details on how your legal cannabis business will generate enough revenue to repay the loan on time. Make every effort to be as thorough as possible.
Improve Your Credit Score
Begin with the fundamentals: pay off any loans or credit cards with late fees or outstanding sums. You can also create a payment plan, use a secure credit card, or become an authorized user.
Put Money Aside For A Down Payment
If you intend to create a cannabis shop or any other cannabusiness, you should save as much money as possible for a down payment. This will demonstrate not only your financial capability, but also your belief in your business concept.
Mortgage And Sale-Leaseback Financing
If you own a small business with a physical location and need to build a new dispensary or remodel a current one, putting a cannabis agriculture property for Lease can help you finance the job. Rainbow has developed a reliable process for providing cash to cannabis operators at a time when funding in the industry has dried up. We can provide cash that is related to the cannabis operators’ real estate portfolio. We accomplish this through two methods: sale-leaseback transactions and senior secured first mortgages.
Sale Leasebacks
Sale leasebacks allow you to use the money you put into cannabis properties in New York without incurring debt. Rainbow provides 9-13% capitalization based on purchasing price. You can lower balance-sheet liabilities through sale-leasebacks and are not required to provide personal guarantees. Because these are absolute NNN leases, you can operate without interruption. The period is 10-15 years, with several 5- or 10-year extension options available. Tenant Improvement Allowances are also available.
Mortgages
Mortgages allow you to keep ownership of your property or fund a buy option in your lease. There is an LTV of up to 80% available, with interest rates ranging from 10-15% and no amortization required. The loans are for a period of 2-4 years, with options for extension and prepayment.
If you need to leverage, refinance or sell real estate for a working capital, or have cannabis cultivation property for sale, get in touch with us Rainbow.