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How to get cannabis business funding

Here's how you can get cannabis business loans in Canada.

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Carmen Chai
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Name Product Interest Rate Loan Amount Loan Term Minimum Revenue Minimum Time in Business Loans Offered
SharpShooter Funding Business Loan
SharpShooter Funding Business Loan
Prime pricing from 9.00%
$500 - $500,000
6 - 60 months
$10,000 /month
6 months
Unsecured Term, Merchant cash advance, Invoice factoring
SharpShooter provides capital to small businesses that are underserved by banks and credit unions. It measures overall business health and potential rather than focusing strictly on traditional metrics. Fill out a simple application and get pre-approved in minutes. Receive your funds within 24 hours.

To be eligible, you must have been in business for at least 6 months with a minimum of $10,000 in monthly deposits.
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Lending Loop Business Loan
Lending Loop Business Loan
Starting at 4.96%
$10,000 - $500,000
3 - 60 months
$8,500 /month
12 months
P2P
Lending Loop is Canada’s first regulated peer-to-peer lending platform. Complete an application in 5 minutes. Once you accept your loan offer, investors will begin to fund your loan on the marketplace. Your loan will be transferred to your bank account when it is fully funded.

To be eligible, you must have been in business for at least 12 months and have a minimum of $100,000 in annual revenue.
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Loans Canada Business Loan
Loans Canada Business Loan
Prime Pricing from 9.00%
$2,000 - $350,000
3 - 60 months
$4,166 /month
100 days
Unsecured Term, Secured Term, Line of credit, Merchant cash advance, Equipment financing
Loans Canada connects Canadian small business owners to lenders offering financing up to $350,000. Complete one simple online application and get matched with your loan options.

To be eligible, you must have been in business for at least 100 days, have a credit score of 410+ and show a minimum of $4,166 in monthly deposits ($50,000/year).
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OnDeck Business Loan
OnDeck Business Loan
8.00% – 29.00%
$5,000 - $300,000
6 - 18 months
$10,000 /month
6 months
Secured Term, Line of credit, Merchant cash advance
OnDeck offers fast and simple financing. Apply in less than 10 minutes with your basic business information and see your loan offers without hurting your credit score. Get approved within 1 business day, and choose your term, amount and payback schedule once approved.

To be eligible, you must have been in business for at least 6 months with a minimum monthly revenue of $10,000.
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Finding a cannabis business loan in Canada can be a challenge since not all lenders are open to funding the cannabis industry. Many of the big banks are currently hesitant – although some may be warming up to the idea. But even if you don’t qualify for a bank loan, there are other legitimate lenders that can offer cannabis financing.

Where can I get cannabis funding in Canada?

Online lenders

Some online lenders will happily work with cannabis businesses. For example, you can get a standard term loan to pay for large, one-time expenses. Online lenders will approve loans to cannabis businesses on a case-by-case basis. You’ll typically need to have been in business for several months at least and meet their minimum revenue requirement.

Banks

While consumers may turn to banks as the most traditional route to source a loan to buy a home, a car, or to start a business, most of Canada’s major banks are reluctant to dole out funding for the cannabusiness sector. BMO is an exception to that norm and has generally offered substantial loans and lines of credit to cannabis businesses. In late June of 2018, Aurora Cannabis signed a loan deal with the Bank of Montreal for an astounding amount of up to $250 million. However, if your cannabis business isn’t as big as players like Aurora Cannabis, Canopy Growth and the Green Organic Dutchman, it can be more challenging for you to get approved, and the application process alone can cost you thousands of dollars.

Credit unions

Credit unions have more flexibility to provide loans to the cannabis industry compared to big banks. Because credit unions are controlled by their union members, the acceptance of your application hinges on whether they’re conservative or have any hesitation to fund a cannabis business.

Crowdfunding

Crowdfunding is a way for businesses to raise funds from a large group of people who are interested in your mission or supporting your startup idea. You may be able to turn to crowdfunding websites like Kickstarter and GoFundMe to raise capital for your cannabusiness. Some websites also allow you to offer investors equity or shares in your business. Read more about cannabis crowdfunding sites.

Regular crowdfunding vs equity crowdfunding

  • Regularcrowdfunding requires the business to provide backers with some form of reward, like a free product or early access to a service, for their contributions. Platforms like Kickstarter usually offer reward tiers, which means you can offer backers different reward levels depending on how much money they contribute.
  • Equity crowdfunding gives backers a piece of your company. In this way, backers become investors. This essentially means you’re giving up a portion of your business.

Which should you use? It depends on your business plan and what you’re willing to give. When it comes to donation-based backing, you’re building a potential customer base instead of gaining investors.

Private equity firms

Financial firms may be willing to offer short-term high-interest loans or funding for a large stake in your company. If you’re not willing to give up some of your ownership, look elsewhere for funding.

Venture capitalists

In nearly all industries, you’ll find venture capitalists, who are wealthy investors interested in helping startups and small businesses grow, often in exchange for equity. If you manage to score a pitch meeting with venture capitalists, make sure you have a solid business plan to win their investment.

Angel investors

Similar to venture capitalists, angel investors help businesses get started and typically deal with smaller amounts of money. While you won’t see them loan out large sums like venture capitalists or private equity firms, their involvement may be the financial boost you need to get your company off the ground.

Cannabis-focused hedge funds

In a nutshell, hedge funds are pooled investments raised from a fund manager who takes the pot of money and invests it according to the strategy they promised to use. In this case, they’d pour the funding into worthy cannabis businesses, potentially yours.

What types of loans are available to finance my cannabis business?

If you’re looking for cannabis business loans in Canada, you have several options:

  • Business loans. Business loans provide your company with funding for any business-related expenses, like growth, filling in cash flow gaps and covering other expenses. You repay the funds, plus interest and fees, in monthly installments, over terms of up to 20 years. Alternative lenders are your best bet for help with funding your cannabis business.
  • Merchant cash advance. A merchant cash advance lets you borrow money in exchange for a percentage of your daily credit card and debit sales. Lenders determine the amount you can borrow by looking at your historical sales data. The amount you’ll pay back month to month will vary based on your sales. It’s usually a percentage of your sales, including a “cost of doing business” fee.
  • Business lines of credit. A business line of credit allows you to borrow funds up to a predefined limit, and only pay interest back on the money you borrow. This flexibility means you can access cash up to your credit limit continuously over the course of many years. Alternative financing companies offer lines of credit to help cannabis businesses cover ongoing expenses.
  • Mortgages. Aside from term loans, mortgages are the other most sought after financial products for cannabis businesses. These secured loans can be used to buy or refinance the buildings or land you need to run your business.
  • Equipment leases and loans. Also available through alternative financing companies, cannabis businesses can use equipment loans to pay for hardware, software, vehicles and more. Your equipment will generally serve as collateral to secure the loan.
  • Personal loans. If you’ve got a good credit history, you could apply for a personal loan, which you might be able to use to start or fund your cannabis business – although this will depend on whether the lender allows it or not. Keep in mind you’ll be personally responsible for paying back a personal loan, even if you use it for business purposes. Compares business loans vs personal loans.
  • Home equity loans. Homeowners can also borrow against the value of their houses with a home equity loan or a home equity line of credit (HELOC). You can usually borrow up to 80% of the equity you own in your home. Your home will be used as collateral to secure the loan or line of credit – a risky move for any business venture.

Cannabis business loan costs

Like any loan, there are generally two main costs you’ll need to pay attention to when comparing loans.

  • Interest. Lenders charge a percentage of the amount you owe each month, which they then add to the amount you repay. For business loans, interest rates typically start as low as 5% and go up to 30% or higher.
  • Fees. Business loans may come with fees involved in taking out the loan. The most common fee is an origination fee. Lenders usually charge between 0% to 5% and often deduct it from the amount you borrow.

Lenders often express your loan’s interest and fees in one percentage called the annual percentage rate (APR). If a loan doesn’t come with any fees, the APR and interest rate are the same. If it does, the APR will be higher to reflect those additional costs.

How to qualify for cannabis business financing

In order to apply for cannabis business funding, you’ll need to provide information regarding your business plan, expenses, revenue and more. While it will vary between providers, documents and requirements may include:

  • Meeting minimum monthly revenue requirements
  • Meeting minimum time in business requirements
  • Meeting any credit score requirements
  • Meeting any minimum age and residency requirements
  • Having a business bank account
  • Showing a solid business plan
  • Having no criminal record and being able to pass a background check

Do I need a business plan to get a loan for my cannabusiness?

Having a clear business plan will help you secure a loan for your cannabis business, whether you’re filling out a quick application for an online lender or you’re making your business case to a room full of potential angel investors. You need to know the ins-and-outs of your business’s short- and long-term goals, why you need financing to get there, and how you’ll either pay your loan back or help your investors make money for their involvement.

If you’re applying for an online loan, a sales representative will likely follow up with you to ask questions about your venture, its legitimacy, and what your sales and resources are for repaying your loan. Private equity firms, angel investors, venture capitalists and hedge fund managers will grill you about your business plan until they’re convinced you’re a promising business worth investing in. If you’re applying for a grant, the same ground rules apply: Organizations want to know what you’ll be doing with your funding to get your business off the ground.

Ultimately, writing a business plan will help you gauge the feasibility of your venture and decide on what the financing will be used for. Its contents might include:

  • A company description. Clarify what your business does and who it serves. Consider which competitive advantages your business will have.
  • Market analysis. Is there a great market need for your business? Who will be your competitors? Are there trends that your business is looking to capitalize on?
  • Organization and management.Choose a legal structure for your business. Create an organizational chart to show who will lead your business.
  • Marketing and sales. How will you find customers and what defines a sale – or the point at which you make money – in your business?
  • Funding request. Describe how much funding you’ll need, what you need it for and how you’ll deploy the capital.
  • Financial projections. What will your revenue and expenses look like? Make financial forecasts for at least the next three years and explain why they make sense.

Can lenders tell if I lie on my application?

It might be tempting to pretend you’re in another, less complicated industry when applying for financing – but lenders have ways of making sure that you’re telling the truth.

Most lenders need to verify the information on your application is correct and that you’re in an eligible industry. They may even require an on-site visit before you can get approved for a business loan.

It’s never wise to lie on an application. Since the countrywide legalization of cannabis, some banks, credit unions, online lenders and investors seem to be jumping on board, so you’re better off applying with a cannabis-friendly lender if you’re trying to get a business loan.

What can I use a cannabis business loan for?

Cannabis business loans in Canada are a lot like other loans – you can use them to cover almost any cost related to your business. Here are some common expenses cannabis businesses can use a business loan to cover:

  • Cannabis business licensing fees. Starting a new business? You’ll need to get a business license to register your business.
  • Grow house costs. Setting up and maintaining a grow house is expensive — you have to have a strong grip on the indoor climate to get the best product. Costs include land, buildings, electricity, water and much more.
  • Dispensary costs. Running a dispensary can come with daily recurring costs that your business might not be able to afford when it’s just starting out — like paying your rent and bills.
  • Hiring new staff. Bringing new people on board can increase productivity and future revenue — but you’ll need to be able to pay their salaries first.
  • Paying for equipment. Some cannabis business lenders offer options for leasing or buying new equipment that you’ll need to keep things running smoothly.
  • Utilities. Business owners with grow houses especially might want to consider taking out a line of credit or business loan to cover those high electricity and water costs.
  • Rent, land or real estate costs. You’ll need a place for your business to operate. A commercial mortgage can help you rent or buy your first piece of real estate or expand your current operation.

Representative example: Leslie gets financing for her cannabis business

Leslie wants to start growing cannabis in bulk on her farm to sell to distributors and dispensaries. Besides buying a lot of seeds and growing equipment, she also needs to pay for renovations, lights, a security system worth at least $5,000.00 as per federal standards, licensing fees, staffing, administrative costs, increased electricity and hydro bills, and other expenses incurred during the first year before she starts bringing in revenue.

Leslie used to own a second home, which she sold to make up most of the money needed to cover startup costs, but she is still short about $150,000.00.

Leslie finds an online lender that offers loans for cannabis businesses and submits an application. With a strong credit rating of 820 and a good amount of equity built up in her farm, she is approved for a 4-year loan with a competitive APR. The lender only requires that 13% of the loan plus interest be paid back during the first year while Leslie grows the business, after which she has to pay back 29% of the loan plus interest each year.

Startup costs + first year operating expenses$750,000.00
Loan typeTerm loan
Loan amount$150,000.00
Interest rate (APR)9.90%
Loan term4 years
Additional feesOrigination fee of 3.50% ($5,250.00)
Monthly payment (year 1)$1,713.45
Monthly payment (years 2, 3 & 4)$4,204.74
Total loan cost$171,932.04

*The information in this example, including rates, fees and terms, is provided as a representative transaction. The actual cost of the product may vary depending on the retailer, the product specs and other factors.

Marijuana regulations by province and territory

Under the Cannabis Act put into effect on 17 October 2018, Cannabis is legal across every province and territory in Canada. However, laws and regulations surrounding the buying, selling and growing of cannabis vary between provinces and territories.

Each province and territory has unique laws that determine:

  • How cannabis can be sold.
  • Where cannabis stores may be located.
  • How stores must be operated.
  • What the individual possession limits are for customers.
  • The minimum age required to purchase cannabis.
  • Where cannabis can be used in public.
  • Requirements on personal cultivation.
  • Rules surrounding the transportation of cannabis.

As of April 2021, here are the current regulations for age and distribution for the provinces and territories:

How to start a marijuana dispensary

Opening a dispensary is not as easy as growing some plants and setting up shop. However, if you’re willing to put in some work and deal with challenges, there is money to be made. Keep in mind the regulations above, since not all provinces and territories support the purchasing of marijuana from privately owned stores.

  1. Understand your province or territory’s laws. Research whether you can dispense cannabis to locals from a privately owned store. Not all provinces and territories support both.
  2. Make sure you’re eligible. Once you find a lender whose willing to provide you with financing, make sure you meet the eligibility requirements in order to receive the funding.
  3. Research any tax laws. Be in the know when it comes to paying taxes on your business. Contact an accountant to learn about the cannabis taxation laws in place in Canada. It’s likely that these will change in the coming years since cannabis has only recently been legalized and things are still being smoothed out.
  4. Find a compliant rental space. Look into zoning laws that could affect where you can open a dispensary. You’ll typically find that you cannot open a cannabis-based business near a school or a park.
  5. Create a business plan. A good business plan sets you apart from other businesses seeking similar financing and can sometimes help determine the amount of money you’re offered and the APR you’ll face.
  6. Get a license. Licensing for your dispensary will vary depending on your province or territory’s laws and can be an expensive and lengthy process.
  7. Get good product. Before cultivating your own product, you may need to buy from other growers. Carefully review how to stay 100% compliant with any laws when purchasing supplies.
  8. Abide by packaging laws. Each province and territory has unique transporting and packaging laws when it comes to cannabis. You’ll need to abide by these laws when moving product.
  9. Market your business. Consider buying advertising in industry publications and on relevant websites and seek publicity in the media and online world.

How do I get a loan to open a dispensary?

Online lenders are more open to cannabis dispensary funding than financial institutions such as the major banks. Online lenders, however, do not guarantee approval and will only approve cannabis business loans on a case-by-case basis. Online lenders’ criteria will vary, but generally, you will need to have been in business for several months and making revenue (at least $5,000-$10,000 monthly). Each online lender will have other financial requirements that differ from each other. Before opening a dispensary, you will need to do lots of preliminary research. Become familiar with provincial and federal laws, and find out what documents and information you’ll need to get licensed. You will also need a high-quality business plan. If you already meet the requirements, compare online lenders now.

How to start a cannabis business legally

Bottom line

While it can be a challenge navigating the laws and regulations in place surrounding cannabis, it’s likely to become easier in the future once the dust settles and the rules have been smoothed out. Finding financing to get your cannabis business off the ground is definitely possible, with both traditional and non-traditional lenders supporting the industry.

Be sure to compare all available financing options to find one that’s the most beneficial for your business.

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