Merchant Growth Business Loan
Borrow up to $500,000
- Rates from 12.99% - 39.99%
- Loan terms from 3 - 12 months
- Free online loan quote
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Funding your CBD business can be a bit complicated, since most of the big banks don’t want to get involved with the cannabis craze. While not as difficult as finding funding for a cannabis business, you still might have to look to alternative lenders to get the financing you need.
Many online lenders that are willing to finance cannabis businesses will also work with CBD businesses. You can learn more about how they work by checking out our guide to financing your cannabis business.
You likely won’t be able to walk into your local bank and get approved for funding for your CBD business. Many of the big banks, with the exception of BMO, currently don’t support lending to cannabis businesses – although some may be warming to the idea. Online lenders, some credit unions and smaller banks, such as Alterna Bank, could provide the much needed financing your cannabis business needs. Some online lenders will approve loans to cannabis businesses on a case-by-case basis, but you’ll typically need to have been in business for a few months at least.
Leslie wants to start growing cannabis in bulk on her farm to sell to distributors and dispensaries. She needs to pay for seeds, growing equipment, 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 she’ll incur during the first year before her business becomes profitable.
Leslie sold a second property she owned to cover most of her startup costs, but she is still short about $150,000.00.
She 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, Leslie 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 she 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 type||Term loan|
|Interest rate (APR)||9.90%|
|Loan term||4 years|
|Additional fees||Origination 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.
To find the best loan for your business, start by asking yourself what you need the money for. Need a new extraction system? An equipment loan might be the way to go. Want to buy some more land to grow your hemp? You might want to look into real estate and bridge loans.
Also ask yourself what your priorities are. If you’re interested in the lowest cost loan, you might have to spend some more time on your application — and offer up collateral. After you’ve compared lenders and narrowed down your options, reach out to get a more personalized offer.
You can finance the following expenses for your CBD business:
In order to apply for a business loan, you’ll need to provide information regarding your business plan, expenses, revenue and more. While it will vary between lenders, documents and requirements may include:
Lenders offering business loans ask to see your personal credit report to make sure you meet the following criteria:
There are two main challenges that CBD business owners face: Legal issues and limited time in business.
To manufacture products containing CBD, you’ll need a processing license. You’ll need to file the appropriate paperwork with Health Canada and pay any required deposits or fees in order to get your license. This license allows you to cultivate, produce and package cannabis. You’ll also need to look into any additional permits and licenses relevant to your province or territory. If you’re going to be packaging cannabis, you’ll also need to apply for the cannabis stamping regime.
After you’ve received permission to pursue a cannabis operation, check that your business will comply with all local, provincial/territorial and federal regulations.
CBD products are relatively new, so chances are your business is a startup. Traditionally, lenders prefer to work with businesses that have been around for at least one to two years and have a consistent revenue of at least $5,000 a month.
Qualifying for affordable funding before you can meet those requirements can be difficult at a bank, credit union and even some online lenders — even in the safest of industries. Often, your best bet is to work with a lender that specializes in startup financing or to look to business loan alternatives.
Thinking of starting a hemp farm? Already own a CBD dispensary? Here are a few pointers to maximize your success:
Financing a CBD business is similar to finding funding for a cannabis business – but oftentimes easier, although you can still run into some roadblocks. Make sure your lender is willing to work with businesses in your industry before you apply. You can learn more about your business financing options by checking out our guide to business loans.
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