7 Ideal Funding Options for Cannabis Startups

July 10, 2019

Planning to roll into the cannabis industry and cash in on the boom but don't have enough money? Here are ideal financing options for weed startups. 

Analysts expect the cannabis industry to grow to 41 billion by the year 2021. The journey of growing weed startups is murkier than you can think.

There are a couple of difficulties associated with the use of business finance. Most loans come with unbearable interest rates and are not a good option for a marijuana start-up business.

However, more and more financial institutions are showing their will to lend to the cannabis industry. Banks are skeptical about lending to small cannabis businesses. To thrive in the industry, you have to source for traditional financing ways.

Securing finances for a cannabis business is difficult because of the current legal environment. The federal government has not yet legalized marijuana at the federal level. However, marijuana is legal in some states.

Here are some funding options for weed startups. 

Is A Bank Loan an Option?

The federal government regulates most of the major banks. The federal government views the realm of weed as a criminal activity, and it is, therefore, difficult for a bank to extend loans to your weed startup.

You may argue that the money is for personal use, but the bank will still decline. This is because money laundering attracts heavy fines for the banks.

Alternative Financing Option for Weed Startups

Securing a loan is difficult, but you can still finance your weed business. Approach banks for loans, accounts, and credit cards in states that will accept your offer.

Alternatives are not quite safe as compared to banks. Therefore, this is one of the best options since the federal government does not regulate such institutions.

The following are the seven options you can consider while looking for ways to finance your cannabis business.

  1. Venture Capital

There are a couple of venture capital firms that are willing to lend to cannabis startups. If you are looking for funds to propel an established weed business, these financiers can do you good.

Venture capital firms ready to fund weed businesses are all over, and you can access some of them with the click of a button.

  1. Private Investors

Private investors are showing interest in the industry. As a cannabis businessman, you can approach private investors to help you expand your business.

When doing this, make sure you have a good credit rating and reputable financial records.

Approach your private investor diligently and with a lot of honesty. Savvy investors are very calculative and they always shun away from any complicated deals.

A lot of family businesses and hedge funds have also shown their interest in the realm of cannabis. Be ready to tap into these opportunities and maximize your returns.

  1. Crowdfunding

Crowdfunding is gaining popularity as an option to access financing for start-up businesses. There are many celebrated platforms where these services can be accessed.

Some platforms are preferred since they have already approved credit for many cannabis firms.

  1. Angel Investors

Angles investors are willing to invest in this lucrative sector. Weed business is highly reputable because they pay their loans on time and on high interest.

Locating your angel investor is not a daunting task. You only have to check out the angel list and go directly to the section that is dedicated to helping start-up businesses.

In the dedicated section, you can find angel investors who have an interest in investing in marijuana businesses. If possible, find angel investors you have previously worked with to see whether they can improve the terms of lending.

  1. Debt Funding

Securing credit by taking loans is the other option. While doing this, pay keen attention and avoid bad credit credit cards.

Such cards can be more harmful than due to unfavorable federal regulations. The rise of lenders has made it possible for cannabis businesses to secure the funding they need to propel their businesses.

  1. Debit System

Some people suggest that you can use your credit cards to secure funding for your business. It is wise to be attentive since this venture can go south. It is not easy to secure a loan using your credit card due to federal regulations.

You can take the risk and use your personal credit card to secure funds for your cannabis business. Whatever the case, a credit card may not be the best option.

There is another flourishing way of using the debit system which is offered by special systems. Such a special platform allows entities to accept payments through debit cards from consumers who are regular users of the platform.

The platforms are handled separately from the banking system and thus you can use debit cards transactions. However, the federal government does not monitor these transactions, thus making them unsafe. Still, the use of a debit card is more secure when compared to handling cash.

  1. The Point of Sale System

You have a reason to smile if you have been looking for a point of sale system to manage your cannabis business. There are special options that can help you run your business while still abiding by the law. These systems are consistent special industry legalities 

There are a variety of readymade systems for cannabis businesses. These systems help you to manage all the processes involved in the sales process. Such platforms are compliant to state and federal laws, and they will even help you manage your business's customer base.

For weed growers and processors, there are special systems that will suit your needs. A well-built system will help you manage your daily finances.

Well-equipped platforms allow growers to manage their business processes, including cultivation, e-commerce, distribution and point of sale. No matter the processes you deal in, a prudent platform is equipped with strong features to help you track your day to day operations.

Always Conduct Research

The realm of cannabis is a lucrative sector which ought to be treated with the seriousness it deserves. Since the sector is criminalized by the federal government, players in the industry are advised to look for alternative funding.

A new dawn is here since local institutions have emerged to solve the needs of weed business owners. Do your research to access low-risk financing for your weed startups business.

Continue exploring our blog for more financial tips.