Different businesses may face different challenges but all types of businesses share one challenge in common and that is the challenge of getting adequate finance for the business. This challenge is doubled when it comes to cannabis business. The complexity of the legal system is the root problem when it comes to financing a small business. The cannabis industry is characterized by strict regulations to dealings have to be made in cash.
Even though the complex legal status of cannabis business make institutional banks shy away from investing in the marijuana business, there is still hope. There are still many ways to finance your marijuana business. Keep reading to find out.
Debt funding is simply funding by using debt. This can be done by either taking loans or using business credit cards. Even though many lenders may shy away from offering any loan to a cannabis business, still other options can work. These include:
. Online Lenders
. Debit system
Online lenders like Fast Capital and Kabbage are examples of online lenders that offer short-term alternatives like lines of credit or working capital. Since most of the online lenders are reluctant when it comes to getting involved in the cannabis business, make sure you research and ask around in order to find an online lender that is going to assist you. Also, keep in mind that these lenders do not offer credit cards.
This option is tricky since you are likely not going to have a business credit card to use in your marijuana business. Even though you may use your personal credit card, these transactions are going to be illegal technically. You can only use this option as the last resort but be mindful of the repercussions.
An equity fund is a fund that invests primarily in stocks. It allows the investors to purchase into the fund and hence buy stocks more easily compared to the purchasing individual securities. Equity funding is currently trending and with marijuana business being an emerging business, equity funding is an option worth considering. The ways of acquiring equity funding include:
. Venture Capital
. Angel investors
Venture capital is provided by funds or firms to small emerging business with the high potential to grow or small businesses that have already demonstrated high growth. Numerous venture capital firms out there can offer financial support to the marijuana business. One such firm is the Casa Verde Capital owned by Snoop Dogg.
An angel investor is an influential person who offers capital for a business start-up, usually for ownership equity or exchange for convertible debt. Cannabis business has been able to pique the interest of angel investors since it is an emerging business. To find an angel, you can check out AngelList or you can try to reach out to the angel investors that are already in your network who are interested in cannabis business.
Just like in any other business, the financing option you choose will depend on the stage that your cannabis business is in. Even though financing alternatives are not the best option, at least they are not obliged to stick to the same laws as the banks making it easier for cannabis business to get the funding they need.