How to Qualify for a Term Loan

Even as the cannabis industry continues to grow by leaps and bounds, with projections to reach $30 billion in sales by 2025, the competitive nature of the industry requires an edge. To achieve that edge or competitive advantage in the marketplace, a cannabis-related business often needs access to a term loan. The question becomes how does a cannabis-related business qualify for the term loan?

What is a Term Loan?

A term loan for a cannabis-related business is a bank loan that is usually in the form of a lump sum with a clearly defined payment schedule. A term loan can require a relatively short period of time for repayment in the range of a few months or it can require a long period of 10 years. This type of cannabis business financing can be used to buy cannabis equipment, expand the business, and make other capital expenditures.

How Does a Cannabis-Related Business Qualify for a Term Loan? 

The financier may require a corporate or personal guarantee for the term loan, and they may require some form of collateral. But, the question is how to qualify for a term loan. To qualify, the cannabis-related business must meet a series of prerequisites to ensure the viability of the operation. Here are the top considerations.

• The cannabis-related business must have been in business for at least two years.
• The owner of the cannabis-related business must have a personal credit score greater than 700.
• The cannabis-related business must show profitability via current/recent tax returns.

Depending on the underwriting criteria, the interest rates fall in the range of between 8% and 18% APR. For the owner of a cannabis-related business like a dispensary, a term loan is a great option for launching a new dispensary, brand, or product.

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Pros vs. Cons of a Term Loan?

A term loan is a relatively quick-and-easy form of financing. A cannabis-related business should be aware of the following pros and cons:

Pros:

• It’s a great option for a cannabis-related business.
• A term loan typically involves minimal paperwork.
• The approval process is typically relatively easy.

Cons:

• A term loan can involve higher annual costs for a cannabis-related business.
• It may involve a collateral requirement or personal guarantee.
• A term loan could involve a UCC filing of a moveable asset.

After reviewing the benefits and drawbacks, a term loan offers clear advantages for a cannabis-related business. It’s a great option for a dispensary expansion, a large expenditure, or a one-off business purchase.

Why Consider a Term Loan For Your Business?

A term loan is a flexible funding option that delivers the level of financing within the required timeframe. To deliver the optimal funding solutions, Canna Business Financing is knowledgeable about which lenders are best for your cannabis business. 

That includes specific recommendations for how term loans and other funding options support the financial requirements of cannabis-related business. With expertise and consulting from Canna Business Financing, the funding process is streamlined and effective. Contact Canna Business Financing today to consult with expert representatives.

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