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Funding your CBD business can be a bit complicated, thanks to the gray legal area it falls into and relative newness of the industry. 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.
You might not be able to walk into your local bank and get approved for funding for your CBD business. Instead, consider one these types of financing — depending on your business’s needs:
Many lenders that specialize in cannabis financing also work with CBD businesses. Most are available online and in a select few states — mainly where cannabis is legal. You can learn more about how they work by checking out our guide to financing your cannabis business.
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, you might have to spend some more time on your application — and put 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:
CBD business loans typically require fewer documents than your standard business loan. While it depends on the type of financing you’re applying for and the lender, you generally need to provide the following:
Lenders that specialize in CBD and cannabis business loans ask to see your 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.
While the 2018 Farm Bill reduced restrictions on cultivating CBD products, the federal government, states and even cities have their own laws regulating CBD — such as banning its addition to food or beverages.
This makes CBD a high-risk industry in the eyes of banks — many are afraid they’d be shut down or lose their FDIC insurance for working with a business from that industry. Others simply don’t want to risk working with a business that might be raided or shut down.
That can limit your options to lenders that offer cannabis funding or work specifically with businesses in high-risk industries. Because they come with higher risk to the lender, these options are more expensive than your traditional business loan.
CBD products are relatively new to the mainstream, so chances are your business is a startup. Traditionally, lenders prefer to work with businesses that have been around for at least three years with steady revenue.
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 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 isn’t as difficult as finding cannabis funding, but 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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