Top 3 cannabis business loans

Federal regulations make it difficult to find a loan from most lenders if you’re in the cannabis industry. But it’s still possible to find funding — though you’ll generally need good credit.

3 best cannabis business financing options

• Best term loan: Diamond Business Loans
• Best for bad credit: United Capital Source
• Best connection service: Green Leaf Funding

Finder Rating: 3.85 / 5

★★★★★

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Best term loan: Diamond business loans

680
Min. Credit Score

5.9%
Starting APR

$150,000
Loan Amount

• Info
• Pros and cons
• Details

This California-based lender specializes in working with businesses that have struggled to find funding elsewhere — and it has a special program specifically for cannabis companies. Its rates are highly competitive compared to other cannabis business loans, but it comes with a high 10% origination fee.

The application is mainly based on your financial history, so look elsewhere if you have fair or bad credit.

Pros

• Low starting APR of 5.9% to 19.99%
• Based on your personal finances rather than your business’s
• Representative guides you through the application process

Cons

• 10% origination fee
• Can take a few weeks to fund
• No online application

Min. Loan Amount	$25,000
Max. Loan Amount	$150,000
APR	5.9% to 19.99%
Interest Rate Type	Fixed
Min. Credit Score	680
Minimum Loan Term	12 months
Maximum Loan Term	60 months

Finder Rating: 4.8 / 5

★★★★★

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Best bad credit: United Capital Source business term loans

550
Min. Credit Score

5%
Starting APR

$5,000,000
Loan Amount

• Info
• Pros and cons
• Details

United Capital Source is an alternative lender that offers a wide range of financing to businesses in high-risk industries, including the cannabis industry.

It requires little documentation, and you might be able to qualify for a loan even if you have bad credit. However, you'll likely need to provide bank statements, so you might not get approved if you're unbanked.

Pros

• Rates start at 5%
• Wide range of financing available
• Online application
• Relatively transparent about costs and process

Cons

• Can be expensive if you have bad credit
• Usually requires bank statements
• Daily or weekly repayments on some products

Min. Loan Amount	$10,000
Max. Loan Amount	$5,000,000
Interest Rate Type	Fixed
Min. Credit Score	550
Minimum Loan Term	36 months
Maximum Loan Term	120 months

Finder Rating: 4.2 / 5

★★★★★

Read review

Best connection service: Green Leaf Money cannabis business loans

700
Min. Credit Score

6%
Starting APR

$100,000
Loan Amount

• Info
• Pros and cons
• Details

This service can help your business connect with a bank or lender that's willing to work with cannabis companies. Its partners offer relatively low rates on working capital loans, though you need good credit to qualify.

You can also find equipment leasing, real estate loans and merchant cash advances through Green Leaf Money. But you'll have to reach out for more info — there's very little available on Green Leaf's website.

Pros

• Low rates on working capital loans
• Connect with multiple types of financing
• Responsive customer service

Cons

• Website lacks transparency
• Not a direct lender — unclear who its partners are

Min. Loan Amount	$1,000
Max. Loan Amount	$100,000
APR	6.98% to 30%
Interest Rate Type	Fixed
Min. Credit Score	700
Minimum Loan Term	12 months
Maximum Loan Term	84 months

Compare more cannabis business loan providers

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Name	Product	Filter Values	Min. Amount	Max. Amount	Requirements
Lendio business loans			$500	$5,000,000	Operate business in US or Canada, have a business bank account, 560+ personal credit score	Submit one simple application to potentially get offers from a network of over 300 legit business lenders.	Check eligibility More Info		loading Fetching your data...
Seek Business Capital loans			$5,000	$500,000	Personal credit of 680+, no bankruptcies in the last 4 years.	Startups and newer businesses could qualify for loans and credit cards with a custom financing package.	Check eligibility More Info		loading Fetching your data...
National Funding business loans			$5,000	$500,000	Be in business at least one year and make at least $100,000 in annual sales. Other loan types have additional requirements.	Working capital loans and equipment financing, some high-risk industries may be eligible.	Check eligibility More Info		loading Fetching your data...
ROK Financial business loans			$10,000	$5,000,000	Eligibility criteria 3+ months in business, $15,000+ in monthly gross sales or $180,000+ in annual sales	A connection service for all types of businesses — even startups.	Check eligibility More Info		loading Fetching your data...
Diamond business loans			$25,000	$150,000	680+ personal credit score, no late payments or bankruptcies	Grow your startup or cannabis business with a line of credit or fixed-term business loan.	More Info		loading Fetching your data...
Green Leaf Money cannabis business loans			$1,000	$100,000	Documented income, records of your business spending and accounts	Connects cannabis businesses with lenders willing to work with them across the country.	More Info		loading Fetching your data...
Fundanna cannabis business crowdfunding services			$10,000	$1,070,000	Must 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.	Raise funds for your cannabis business while using a streamlined platform to communicate with investors and develop a loyal brand following.	More Info		loading Fetching your data...

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Is my cannabis-based business eligible for a loan?

Your eligibility often heavily depends on your personal financial history, since many cannabis businesses don’t have financial business records. Here’s what you generally need to qualify:

• Good personal credit. Generally, you’ll need a credit score of 670 or higher to qualify for a good deal on a cannabis business loan.
• Long credit history. The length of your credit history can also affect your application. Typically, you’ll need at least three years.
• No bankruptcies. You usually can’t have bankruptcies or other negative marks like tax liens or foreclosures on your credit report.
• Business bank account. While not always required, you often need to have a bank account for your cannabis business.
• Minimum time in business. Lenders typically require you to be up and running for at least six months to a year.
• Legal status. Generally, all business owners need to be US citizens or permanent residents to qualify.

Requirements vary depending on the lender. But if you don’t meet most of these requirements, you might want to consider alternative types of financing.

Can lenders tell if I lie on my application?

Probably — most lenders have ways to verify the information on your application is correct and that you’re in an eligible industry.

Some use anti-money laundering or fraud-detection software to weed out cannabis companies. And others look out for suspicious signs in your bank account, like regular deposits just under $10,000. You’re better off applying with a cannabis-friendly lender if you’re trying to get a business loan.

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

Most banks don’t offer cannabis financing because it’s highly risky. Cannabis is still federally illegal, so banks that offer loans to the cannabis industry could be subject to prosecution. They could also be liable if they lend to a business that breaks state law by selling to a minor or transports cannabis across state lines.

These risks make it impossible for you to get a business loan from an FDIC-insured bank and hard to find funding even from non-insured banks or lenders.

What can I use a cannabis business loan for?

Like other business loans, cannabis business loans are restricted to business use. So you can’t use a cannabis business loan to buy a car that is primarily for personal use, for example.

You also generally need to use your loan for the use you mentioned in the application. If you want to buy property or a storefront, you can’t use a working capital loan — you’ll have to apply for a real estate loan.

Cannabis business loan costs

How much your loan costs depends on the type of loan you apply for. Your cannabis business loan might come with the following types of costs:

• Interest. Term loans generally come with an interest rate, usually starting around 6% for cannabis businesses.
• Origination fee. Most business loans come with a fee that you pay at closing, which can run as high as 10% for the cannabis industry.
• Factor rate. If you’re taking out a merchant cash advance, you’ll likely pay a factor rate instead of interest, which usually starts at around 1.09.
• Down payment. If you’re buying equipment or real estate, you might have to pay around 30% up front as a cannabis business.

How safe are loans for cannabis businesses?

Cannabis business loans can be riskier than options available to other industries. Like other businesses in the cannabis industry, cannabis lenders don’t face as many regulations, so it’s possible to run into scams.
Do a little detective work before applying with a lender:

• Check if it’s registered. Look up its registration with the agency that regulates lenders, like a Department of Business Oversight — if it’s a requirement in your state.
• Read reviews. Find out what other other borrowers have to say about their experience and look for red flags.
• Check where it’s been active. Check if the lender has participated in any industry events, like conventions.
• Reach out to other cannabis businesses. If you’re not sure where to start, ask other businesses in your area about where they found financing.

Is marijuana legal in my state?

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 the extra work and deal with some red tape, there is money to be made.

• Understand your state’s laws. Research both current laws and regulations expected to be enacted in the future.
• 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.
• Prepare for taxes. Consult a tax attorney to learn the best way to accept and make payments in accordance with federal and state laws.
• Find a legal rental space. Look into zoning laws that could affect where you can open a dispensary. Often, you can’t open a cannabis-based business near a school, park or church.
• Create a business plan. A good business plan sets you apart from other businesses seeking similar funding and determines your budget and future pricing.
• Get a license. Licensing for your dispensary will vary depending on your state’s laws and can be expensive to pursue.
• Find good products. 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.
• Market your business. Consider offering deals for first-time customers, buying advertising in industry publications and on relevant sites, and seeking publicity in periodicals and blogs.

How to legally start a cannabis business in 2020

How to cover a dispensary’s startup costs

Since cannabis business loans are generally dependent on the owner’s personal finances, it might be easier to find a startup loan than businesses in other industries. But you still might not get the best rates without a track record — or if your credit is less than perfect.

You might also want to consider other options, like equity investments or a personal loan. If you take out a personal loan, make sure the lender doesn’t have restrictions on using the funds for federally illegal activity.

Cannabis business loan alternatives

If your cannabis business doesn’t qualify with an online lender, there are other creative ways to seek out funding:

• Crowdfunding. The US Securities and Exchange Commission (SEC) allows anyone to invest up to $2,200 in small companies in exchange for a stake in the business. Companies can raise up to $1.07 million this way — and one way to do it all in one place is through crowdfunding.
• Business lines of credit. Alternative financing companies also offer lines of credit to help cannabis businesses cover ongoing expenses, though it’s often more expensive than a loan.
• Real estate loans. You can use these loans to buy or refinance the buildings or raw land you need to run your business.
• Private equity funding. Some private equity 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.
• Personal loans. Got a solid credit history? You might have better luck getting approved for a personal loan. But make sure your lender allows you to put the funds toward a cannabis business.
• Home equity loans. Homeowners can also borrow against the value of their houses with a home equity loan or line of credit. You’ll also need to make sure your use is legitimate though.
• Friend and family loans. Your friends and family can also invest in your business by personally lending you the funds and collecting on interest. Bring on a lawyer to help you write a legally binding contract to hold everyone accountable.

Bottom line

If you have good credit, cannabis business loans can be an affordable financing option if you’d rather retain full ownership of your business. But since it’s such a high risk for lenders, you’ll likely pay higher rates and fees than other industries.
For funding that’s more affordable with fewer requirements, check out our guide to investor crowdfunding for cannabis businesses.

• How much does it cost to start a cannabis dispensary?

  How much you’ll need to invest when starting a dispensary will depend on the state, city and county it’s located in. You’ll also need to consider how much product you expect to sell, whether you’ll have an online presence, how you’ll advertise and how many employees you’ll have.

  By taking the time to create a solid business plan, you can answer many of these questions and anticipate how much you’re looking at to start a dispensary.

• Can I get a medical marijuana business loan if recreational cannabis isn't legal in my state?

  You can, though you might have a more difficult time finding a traditional business loan locally. You might want to look to lenders working out of states where recreational marijuana is legal or crowdfunding platforms to connect you with investors.

  If you’re just starting a medical marijuana business, you’ll also need to confirm with your local authorities that everything is legal before you get started.

• Are these same options available to CBD businesses?

  In general, yes. Most lenders that are willing to work with businesses in the cannabis industry are also open to CBD businesses. You can learn more about your financing options with our guide to CBD business loans.

• What is a Schedule I drug?

  A Schedule I drug is a Drug Enforcement Administration (DEA) classification for drugs the federal government considers to have no accepted medical use and a high potential for abuse. Despite the fact that many states have laws that allow medical and recreational use of cannabis, it’s still considered a Schedule I substance, along with heroin and ecstasy.