Get funding to start or grow your cannabis business in April 2018

How to get funding for your cannabis business

Want to start your own cannabis business? Find out your multiple funding options.

The legal gray area of a cannabis-based business makes it nearly impossible to get a business loan from traditional to help start or grow your company.

However, that doesn’t mean you don’t have options for funding a business in this budding industry. As states continue to pass laws regulating the use and cultivation of marijuana, new ways of getting your business the financing it needs are opening up. We take you through your options in the US.

National Business Capital Business Loans

Our top pick: National Business Capital

National Business Capital provides small business owners with a range of financing options. You could get up to $225,000 to grow your cannabis business.

  • Minimum Funding Amount: $10,000
  • No industry restrictions
  • Simple and fast online application process
  • Must have been in business for at least 3 months
  • Must have monthly revenue of $10,000 or more
  • Startup financing available with 680+ personal credit score

    Compare top cannabis business loan providers

    Rates last updated April 23rd, 2018
    Name Product Product Description Min Loan Amount Maximum Loan Amount Requirements
    National Business Capital Business Loans
    Get a large business loan to cover your financing needs, no matter what the purpose is. Startups welcome with 680+ credit score.
    $10,000
    $5,000,000
    Your company must have been in business for at least 6 months and have an annual revenue of at least $180,000.
    LoanBuilder, A PayPal Service Business Loans
    Customizable loans for business owners in a hurry with no hidden fees.
    $5,000
    $500,000
    Annual business revenue of at least $100,000, at least 1 year in business, personal credit score of 600+.
    Diamond Business Loans
    Grow your cannabis business with a line of credit or fixed-term business loan.
    $25,000
    $150,000
    Personal credit score of 680, no late payments or bankruptcies.
    GoKapital
    Find the funding your business needs without the worry of meeting a minimum credit score.
    $10,000
    $5,000,000
    Minimum of $10,000 average monthly revenue. At least four months of business bank account statements.
    Green Leaf Money
    Connects cannabis businesses with lenders willing to work with them across the country.
    $25,000
    $10,000,000
    Documented income and records of your business spending and accounts.

    Compare up to 4 providers

    What types of financing are available for cannabis businesses?

    You can’t get financing for your cannabis business from a bank. But with this industry growing, you have many other options to choose from:

    • Business loans from alternative financing companies. Some lenders like Diamond Business Loans specialized in cannabis businesses and work to meet their unique needs. You can get a standard term loan from these lenders to pay for large, one-time expenses.
    • Business lines of credit. Alternative financing companies also offer lines of credit to help cannabis businesses cover ongoing expenses.
    • Real estate loans. These secured loans can be used to buy or refinance the buildings or raw land you need to run your business.
    • Equipment leases and loans. Also available through alternative financing companies, cannabis businesses can use this loan to to pay for hardware, software, vehicles and more.
    • Crowdfunding. The US Securities and Exchange Commission (SEC) allows anyone to invest $2,000 in small companies in exchange for a stake in the business. Companies can raise up to $1 million this way. Fundanna is an equity crowdfunding platform that specializes in cannabis businesses.
    • Private equity firms. Financial firms may be willing to offer short-term high-interest loans or funding for a large stake in your company.
    • Venture capitalists. In nearly all industries, you’ll find wealthy investors interested in helping small businesses grow, often in exchange for equity.
    • Angel investors. Similar to venture capitalists, angel investors help businesses get started and typically deal with smaller amounts of money.

    Why can’t I get business financing from my local bank?

    Although marijuana and cannabis products are legal in many states, it’s still prohibited to buy, sell or use them according on a federal level. The FDIC considers any bank willing to work with a cannabis-based business as taking on an existential risk with potentially negative consequences to the public and in violation of federal law.

    Because marijuana is considered a Schedule I drug by the US Drug Enforcement Agency (DEA), banks choosing to provide loans to businesses associated with the drug could be subject to prosecution.

    These risks make it all but impossible for you to get a business loan from an FDIC-insured bank and puts your business at risk of federal government shutdown.

    What is a Schedule I drug?

    The DEA classifies drugs, substances and chemicals into one of five distinct categories — or “schedules” — according to a drug’s accepted medical use and potential for abuse or dependency.

    A Schedule I drug is considered to have no accepted medical use and a high potential for abuse. Examples of Schedule I drugs include heroin, ecstasy and marijuana. A 2017 bipartisan bill intends to demote marijuana from Schedule I to Schedule III; however, the bill has yet to be up for vote.

    Is my cannabis-based business eligible for a loan?

    Potential loans for your cannabis-based businesses typically won’t involve a bank, but your company is still required to fit specific criteria that will vary by lender.

    Private equity firms, venture capitalists and other investors will likely need to be sure they have a good chance of getting a return on their money. For these investors you must generally:

    • Be a business in operation for at least six months.
    • Be incorporated as an LLC, limited company or S corporation.
    • Have a personal credit score of at least 500.
    • Have no criminal record and able to pass a background check.
    • Have gross monthly sales of at least $10,000. If you’re a startup, have a solid business plan.
    • Have a business bank account.

    Depending on the source or platform you’re using, crowdfunding will require generating enough interest and providing incentives for people to fund your business over others competing for funding.

    What can I use a cannabis business loan for?

    Cannabis business loans are a lot like other loans: You can use them to cover almost any cost related to your business — as long as it’s legal in your state. Here are some common expenses cannabis businesses can use a business loan to cover.

    • Cannabis business license fees. Starting a new business? You’ll need to get a business license to register your business with local authorities and you may also need to get a state tax license. These costs as much as $78,000 a year, depending on what type of business you’re planning on starting (grow houses can be expensive).
    • Growhouse costs. Setting up and maintaining a growhouse is expensive — you have to have a strong grip on the indoor climate to get the best product. According to Marijuana Business Daily, starting an indoor growhouse can cost $75 per square foot.
    • 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 — and might benefit from opening a line of credit.
    • Hiring new staff. Bringing new people onboard can up productivity and future revenue — but you’ll need to be able to pay their salaries first.
    • Paying for equipment. Many cannabis business lenders offer options for leasing or buying new equipment that you need to keep things running smoothly.
    • Utilities. Growhouses especially might want to consider taking outa line of credit or business loan to cover those high electricity costs.
    • Rent, land or real estate costs. You’ll need a place for your business to operate. A cannabis business loan can help you rent, buy your first piece of real estate or even expand.

    Cannabis business loan costs

    Like any business loan, there are generally two main costs you need to pay attention to when comparing cannabis business loans: Interest and fees.

    • Interest. Lenders charge a percentage of the amount you owe each month, which they add to the amount you repay. For cannabis businesses, interest rates typically start as low as around 5% and go up to 20% or higher.
    • Fees. Cannabis loans in particular tend to come with fees involved in taking out the loan. The most common is an origination fee, which lenders often take out of the amount you borrow before you get your funds.

    Interest rates are relatively standard for a business loan. They typically start at around 6% and can go up to 20% or higher.

    But since lenders see cannabis businesses as more of a risk than other business types, it’s not uncommon for them to charge higher fees. With most business loans, you’ll typically pay an origination fee from 0% to 5%. Cannabis business loans can come with origination fees as high as 10%.

    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 safe are loans for cannabis businesses?

    Safety can vary by the type of funding you pursue. Because you’re typically accepting funding from nontraditional sources for a business that could potentially be shut down by the federal government, you’ll want to be careful about how you proceed.

    Keep in mind that venture capitalists, private equity firms and even individual sources are taking a financial and personal risk by providing funding to cannabis-based businesses. These funders may be experienced in dealing with business owners who got their start working in a highly regulated industry and as a result could have their own way of doing business to safeguard their interests.

    To protect your business, you may want to draw up a contract that is strict in its interpretation and specifically worded to avoid any misunderstandings that be used against you in court. If you are not skilled or experienced in contract negotiations, you could consider hiring an attorney to carefully look over your loan contract before you and all involved parties sign it.

    The federal government tolerates marijuana businesses in states where it’s legal but could potentially shut down shops and any other businesses at any time until marijuana is no longer classified as a federal Schedule I drug.

    If you’re giving up equity, a good attorney can help you write a solid contract that is mutually beneficial for your business and your investors. This could protect your total personal investments if your business experiences hardships.

    Crowdfunding for cannabis businesses

    Fundanna Cannabis Business Loans

    Fundanna Cannabis Business Equity Crowdfunding

    Offers people with marijuana startups a platform to raise up to $1,070,000 each year.

    • Maximum Annual Funding Amount: $1,070,000
    • Minimum Annual Funding Amount: $10,000
    • Secure website for safe bank deposits and withdrawals
    • Integrated with social media for easy sharing
      How it worksFeesEligibility
      FundannaList your business on this crowdfunding platform to get connected with investors around the world.Raise between $10,000 and $1,070,000$3,500 listing fee, success fee if you reach your goalsMust own a startup in the cannabis space. You're not eligible if your company is outside of the US or already reports to the SEC.
      CannaFundrBuild a profile on this crowdfunding platform to get connected with investors willing to trade funds for a percentage of ownership.As much as you’re able to raiseA percentage of your business’s ownershipCannabis businesses operating in a state where marijuana is legal.

      SEC regulations

      In mid-May of 2016 the Securities Exchange Commission (SEC) passed regulations on how cannabis crowdfunding functions. Before, you had to be a rather wealthy individual to invest in cannabis.

      Under the new regulations, you can invest $2,000 per year as long as you receive stock in the company. A wealthy individual gets that limit raised to $100,000. It should be noted that this limit is on an accumulative basis, and not per company invested in.

      The other part of the regulation allows small cannabis business to receive up to $1,000,000 in crowdfunding each year through the method. It can require extensive filing with the SEC depending on how much you raise, and a bank account specifically for the funds received.

      Equity crowdfunding vs. regular crowdfunding

      You might associate a website like Kickstarter with crowdfunding, but this model isn’t quite the same as equity crowdfunding. Kickstarter is a platform where backers get some form of reward, like a free product or early access to a service, for their contributions.

      On the other hand, equity crowdfunding gives backers a piece of the company. In this way, backers become investors. Both regular and equity crowdfunding are legal. The latter is highly regulated by the SEC, and the former requires some careful planning when it comes to rewards to abide state laws.

      So, 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. You should also consider that regular crowdfunding requires reward tiers, while equity relies on giving up a portion of your business.
      Compare top crowdfunding options for cannabis businesses

      Marijuana regulations by state

      Many states have legalized marijuana in some form for medicinal purposes, recreational purposes and cultivation. However, federal law still classifies marijuana as a Schedule I drug, which complicates the ability for you to get a business loan for a cannabis-based business.

      As of June 2017, marijuana is legal in some form in 28 states and the District of Columbia.

      StatePossession limitPlant limitRecreational
      Alaska1 oz3 mature, 3 immatureYes
      Arizona2.5 oz12 plantsNo
      Arkansas3 oz per 14 daysN/ANo
      California8 oz6 mature, 12 immatureYes
      Colorado2 oz3 mature, 3 immatureYes
      Connecticut2.5 ozN/ANo
      Delaware6 ozN/ANo
      FloridaTBDN/ANo
      Hawaii4 oz7 plantsNo
      Illinois2.5 oz per 14 daysN/ANo
      Maine2.5 oz6 plantsYes
      Maryland30-day supply, TBDN/ANo
      Massachusetts60-day supply, 10 ozN/AYes
      Michigan30-day supply, 10 ozN/AYes
      Minnesota30-day, nonsmokableN/ANo
      Montana1 oz4 plants, 12 seedlingsNo
      Nevada2.5 oz12 plantsYes
      New Hampshire2 oz per 10 daysN/ANo
      New Jersey2 ozN/ANo
      New York30-day, nonsmokableN/ANo
      New Mexico6 ozN/ANo
      North Dakota3 oz per 14 daysN/ANo
      Ohio90-day supply TBDN/ANo
      Oregon24 oz6 mature, 18 immatureYes
      Pennsylvania30-day supplyN/ANo
      Rhode Island2.5 oz12 plantsNo
      Vermont2 oz2 mature, 7 immatureNo
      Washington8 oz6 plantsYes
      Washington, DC2 oz driedN/AYes
      West Virginia30-day supply TBDN/AYes

      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 some red tape, there is money to be made.

      1. Understand your state’s laws. Research whether your state allows recreational use, how much marijuana it allows a person to have, how many plants you’re allowed to grow and any other parameters it requires state residents to follow. Look into laws expected to be enacted in the future.
      2. Make sure you’re eligible. In addition to your lender’s eligibility criteria, you and your investors may need to pass a background check before proceeding with funding.
      3. Research any tax laws. Even though marijuana isn’t legal according to federal law, you are still required to pay taxes on money earned. This could require accepting and making payments in cash only to steer clear of possible federal money laundering charges.
      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, park or church.
      5. Create a business plan. A good business plan sets you apart from all other businesses seeking similar funding and determines your budget and future pricing.
      6. Get a license. Licensing for your cannabis-based businesses will vary depending on your state’s laws and can be expensive to pursue.
      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 your state’s laws when purchasing supplies.
      8. Market your business. As a startup business, consider offering deals for first-time customers, buying advertising in industry publications and on relevant sites and seek publicity in periodicals and blogs.

      Bottom line

      While you may likely find it difficult to secure funding for your marijuana business, you have several alternatives to bank loans that could help you start up or expand your services. Some options offer term loans with fixed interest while others could be looking to own equity in your company.

      Be sure to compare the funding options available to find one that’s most beneficial for you and complies with all applicable laws.

      Frequently asked questions about funding for cannabis businesses

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      9 Responses

      1. Default Gravatar
        JohnOctober 12, 2017

        Any recommendations on lenders in Southern California? Looking for a private money loan to purchase a commercial property for dispensary retail. Property identified. Thanks!

        • Staff
          LiezlOctober 13, 2017Staff

          Hi John,

          Thanks for reaching out. While we are unable to recommend a particular lender, you may refer to our comparison page on non-bank business loan options that might be able to finance your cannabis dispnesary business. I sent on your email some articles and references on marijuana business investing that you might find helpful.

          Kind regards,
          Liezl

      2. Default Gravatar
        TonySeptember 27, 2017

        Are there any options in NH to grow cannibis or hemp based products for industrial use or medical use.
        I’m a farmer that handicapped and would like to explore options in the state of NH or FL.
        Is there a prevision that allows grow and mfg of cannibis based products. Turnkey operations in NH?
        Thank you

        • Staff
          HaroldSeptember 28, 2017Staff

          Hi Tony,

          Thank you for your inquiry.

          As per checking you are already in the correct page. Please review the content provided on our guide on this page there are types of financing are available for cannabis businesses. Please note that the options available is applicable only in United States.

          I hope this information has helped.

          Cheers,
          Harold

      3. Default Gravatar
        JeffSeptember 22, 2017

        Hello,

        My state just legalized MMJ and I want to open a cultivation operation to strictly grow. Its big rewards but big up front costs to get in the game. Does Finder help cultivation operations as well?

        • Staff
          LiezlSeptember 22, 2017Staff

          Hi Jeff,

          Thanks for reaching out. Just to clarify, finder.com is a comparison website and general information service, we do not provide funding or offer loan ourselves.

          While bank loan is not an option currently available for cannabis businesses, there are other financing options mentioned above that you can look into. One of which is crowdfunding and to know how this works, you may refer to our guide here.

          Kind regards,
          Liezl

      4. Default Gravatar
        StanleySeptember 20, 2017

        How can I get in the business

        • Staff
          MariaSeptember 20, 2017Staff

          Hey Stanley,

          Thank you for reaching out to us.

          You’re on the right page for your concern as it includes how to start a marijuana dispensary found further down the page.

          In summary, these are the possible steps:
          – Understand your state’s laws.
          – Make sure you’re eligible.
          – Research any tax laws.
          – Find a compliant rental space.
          – Create a business plan.
          – Get a license.
          – Get good product.
          – Market your business.

          I hope this helps.

          Best,
          Maria

      5. Staff
        johndeguzmanMarch 16, 2018Staff

        Hi,

        Thank you for contacting finder.

        I understand that you are a looking for loan options in Alaska.

        I have a link that will be helpful in giving you options for financial assistance.

        https://www.finder.com/payday-loans/alaska

        Thanks.

        John

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