how to get funding for cannabis dispensary business

How To Get Financing For Marijuana Dispensary Business?

December 17, 2019 0 Comment

How to get financing for marijuana business dispensary – Even though marijuana, both medical and recreational have gained legal status in several states across the U.S., still the term “marijuana” holds an illicit response and is considered illegal at the federal level

It is because of this unacceptance that laws governing financing and funding have become stringent, almost difficult for marijuana dispensary owners.

Financing For Marijuana Dispensary Business

How to get financing for marijuana dispensary business table of contents:

  • Medical Marijuana Dispensary Financing Challenges
  • Ways to Finance Medical Marijuana Business
  • Equity Financing
  • Debt Refinancing
  • Short-term Loans
  • Equipment Financing
  • Lines of Credit
  • Merchant Cash Advances
  • Crowdfunding
  • Seeking out Private Equity Firms
  • Personal Loan
  • Requirements Needed to Qualify for Marijuana Dispensary Financing

Medical Marijuana Dispensary Financing Challenges

The apprehensions of getting heavily penalized is looming over banks and financial institutions, which is preventing them to extend the very basic of banking services to marijuana businesses. Basic banking services to the tune of opening merchant accounts, getting credit cards or receiving other types of finances to cover operating expenses or availing loans for their businesses, are not provided.

Also, banks can be charged with money laundering for accepting deposits from a medical marijuana dispensary, so the banks do not extend loads to marijuana dispensaries or any other cannabis business setups. 

These issues have largely increased the problems of the marijuana dispensary owners, who now have to rely on third party fundraisers for funding. Earlier, marijuana dispensaries used to approach small business administration, which provided educational materials, training, along with some low-interest, long-term loan options. 

However, ever since a policy went into effect since 3rd April, 2018, all the SBA intermediary lenders were prohibited from extending loans to marijuana businesses, including the players in the hemp industries.

9 Ways To Finance Your Medical Marijuana Business

Understanding the financing options for Medical marijuana dispensaries:

Equity Financing

With this of financing, a group of investors assess the medical marijuana business scenario of your set up and extend the capital, as per your firm’s needs. However, the capital is extended in exchange for an ownership interest in the business.

The benefit of equity financing is that there is no pressure of repaying loan via interest or regular payments. However, the set back is the ownership stake due to which the investors may try and barge into the business operations at times, running the venture as their own.

Debt Refinancing

These are traditional loans, lines of credit and other financial products, but these require the dispensary owners to make regular payments with interest and fees.

Short-Term Loans

This kind of loan can be used as working capital, to purchase equipment, for hiring new staff or for meeting business overhead costs. These short-term loans can be shorter than 12 months as well. In such cases, the repayments can be chosen on a daily, weekly or monthly basis.

The best part about short-term loans is that most of them do not have interest rate. A multiplier or factor fee is used by the lender, which is added to the cost of loan. The factor rate is dependent on several factors such as business performance, the owner’s and business’s credit histories.

Equipment Financing

These are of two kinds of equipment financing and it is purely to assist the business with the procurement of new equipment, which could range from vehicles to point-of-sale systems to furniture and fixtures. In the first kind of equipment financing, when you receive an equipment loan, you pay 10-20% of the total cost of equipment.

The lender pays the rest of the costs and you get to use the equipment immediately. The reason of putting a small percentage down is to help bring the cost of borrowing down. The further repayments can be planned on a weekly or monthly basis.

In the second one, the equipment financing is an equipment lease, in which a down payment is made and then the equipment is used for the lease period. Post the completion of lease period, the equipment is returned with a new lease agreement in place.

Lines of Credit

In this kind of financing, you will receive a lump sum, where the lender will set a credit limit for your account, allowing you to take multiple draws from your line of credit up to the credit limit.

An interest or a fixed fee (depending upon business performance and creditworthiness) will be charged on the borrowed amount. A line of credit is helpful if the marijuana business set up is small.

Merchant Cash Advances

This kind of funding option is good for all those marijuana business owners, who have a low credit score, or haven’t had too much business experience or are not able to avail other financing options. However, the only catch is that these advances carry high interest rates and very short repayment terms. The lender pays a lump sum amount, after adding the factoring fee into the amount of loan.

The lender keeps deducting a fixed proportion of money from your account on a regular basis or deduct a fixed amount from your future sales. When one takes merchant cash advance from a lender, you agree to sell future revenue to the lender. 


With internet, crowdfunding is a rage for fundraising for many small businesses. It’s a way of raising money from multiple investors in exchange for equity or rewards. There are two kinds, equity and non-equity crowdfunding. The former is the type where you give up equity in exchange of investments, while in the latter, you won’t give up your ownership. 

Seeking out Private Equity Firms

Venture capitalists or angel investors can also provide you with funds in exchange for some stake in your firm.

Personal Loan

In case, you have a steady income, then getting a personal loan can also come in handy to finance the expenses. However, sometimes getting a loan might not be easy, considering the kind of industry the business will be.

Requirements Needed to Qualify for Marijuana Dispensary Financing

The requirements to qualify for marijuana dispensary financing is similar to any other business requirements. These will depend upon the lender selected and the type of financing.

  • Personal information like name, social security number and contact information.
  • Personal background check
  • Getting the basic business information ready like business name, contact information, federal tax ID.
  • Business and personal credit score
  • Business licenses and permits to run a marijuana business set up, in your state.
  • Business and personal bank statements
  • Profit and loss statement
  • Income statement, balance sheet and the entire detailed business plan, highlighting the annual revenue and the monetary needs of the business.

While opening a marijuana dispensary in a state is a challenging affair, especially considering the list of state and local compliance issues, a setup has to adhere to, not to mention the non-availability of basic banking facilities. Despite all this, financing a marijuana dispensary is not so tough either.

A little research and hard work will help you open a lot of doors to various financing options and help you locate a vendor, who sees your vision and is willing to work with you. 

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