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Ways To Finance Your California Cannabis Business

Feb 03 2021, by Jessica McElfresh in Marijuana Business, Marijuana Business

Why is it challenging for most cannabis business owners to qualify for business loans? Your business is like any other that needs capital. But it’s unlike most companies in that your product is illegal under federal law. Balancing these two realities can make running a legit cannabis business in California challenging.

McElfresh Law helps cannabis businesses of all shapes and sizes across the state, whether new or established and profitable. One common challenge that we can help with is proper funding. Your business needs capital, and like other businesses seeking commercial loans, you should have legal counsel to protect your interests.

For a consultation about funding your cannabis operation, call us at (858) 756-7107 to set up an appointment.

The Issue With Lending To Cannabis Businesses

There are many reasons traditional banks don’t want your business:

  • The Federal Deposit Insurance Corporation won’t insure a bank taking on “existential” risks
  • Traditional banks want to avoid being charged with aiding and abetting acts
  • Knowingly taking deposits from a marijuana business could be considered money laundering, though this generally has not been enforced
  • How Can Cannabis Businesses Get Loans & Funding?

    A lot of money is made by California’s cannabis industry. Businesses and banks will benefit when reliable, traditional relationships are built:

    • The California Cannabis Industry Association estimates the state’s marijuana market generates annual revenues of $5.6 billion, involving 7,400 businesses that employ about 40,000
    • Sales in the state will grow to an estimated $7.2 billion by 2024

    North Bay Credit Union Welcomes CCIA Members

    Difficulty accessing traditional banking services is one of the industry’s most significant growth obstacles. Though many banks have cannabis companies as clients, it’s not something that’s normally made public. The North Bay Credit Union is the exception.

    In January, the CCIA announced a new partnership with North Bay Credit Union where association members can get several financial services and report Marijuana Business Daily. This includes membership and access to checking accounts, online bill payment, wire transfers, and automated clearing house processing. The Santa Rosa-based credit union has more than $100 million in assets and has worked with marijuana companies for several years.

    Tips for Getting a Cannabis Business Loan

    Online small business funder Fundera has some suggestions for what it sees as the best sources for cannabis business loans for new and existing businesses.

    • GUD Capital: A marketplace connecting business owners to direct lenders. Its website states it can help you find private loans, real estate loans, equipment leasing, and cash advances. Funding can be from $5,000 to $20 million, but your interest rates will be from 8% to 25%
    • Diamond Business Loans: It works with startups and existing cannabis businesses. It offers unsecured capital, a commercial real estate purchase program, and an equipment program. You may get up to $150,000 in unsecured capital, but you need at least a 680 credit score to qualify. The commercial real estate program offers up to $15 million with a 30% down payment required
    • Dynamic Alternative Finance: This is a financing company for cannabis businesses. It has real estate loans, working capital loans, equipment leases, and bridge loans. You may qualify for a revolving line of credit or a term loan in amounts of $250,000 and higher
    • GoKapital: It offers business loans in the form of merchant cash advances. You can get an advance from $50,000 to $5 million. You will qualify if you’ve been in business for four months, your credit score is more than 500, and your annual sales are more than $150,000

    McElfresh Law Can Help Your Cannabis Business

    Whether it’s banking, loans, zoning, licensing, business formation, or legal compliance, we can provide your business with guidance and legal representation in every aspect.

    Attorney Jessica McElfresh has a history of advocacy and success within California’s cannabis industry. She works closely with businesses and local governments to ensure compliance and longevity.

    If you have questions about funding a cannabis operation in California, call McElfresh Law at (858) 756-7107 to schedule an appointment.