No business can survive without the capital needed to purchase equipment, pay salaries, and deal with overhead. The cannabis business has been growing at break-neck pace, but it too requires investments of both time and money before it can succeed on its own. Yet to many dispensaries or grow-ops, financing is a hugely difficult speed bump, given the complexities of lending in the current financial and political landscape. Here's what cannabis businesses must know about how and why they should secure lines of credit.
Any owner will eventually face the need for business credit. Much like a credit card linked to a personal bank account provides credit for groceries or gas, business credit gives you the financial flexibility to take out loans to cover expenses, though on a much larger scale than a personal card. The process of getting business credit isn't terribly complex: you have to register the business with the state and get a federal tax identification number, at which point you can open a bank account specifically for your business. This bank account will provide the start-up credit needed for initial purchases.
It's a persistent myth that cannabis businesses cannot get any lines of business credit, including bank accounts. In reality, banks are just as eager to accept money from marijuana businesses as they are from hardware shops and food trucks. Banks have to comply with state and federal guidelines to provide business credit to marijuana businesses, but most are willing to do so, especially those that are large enough to have their own private army of lawyers to help adhere to marijuana policy.
Just as with any other business, there are two primary ways that a cannabis business can raise money. They can either finance debt or finance equity, giving away value in the company and/or value of future repayments in exchange for immediate capital. Unlike most other businesses, specific venture capital firms are some of the only sources of cannabis financing, restricting both available funds and the terms of repayment. The cannabis industry is largely at the whim of these pot-friendly investors, but this bottleneck has not stopped hundreds of companies across the nation from getting up and off the ground.
Credit isn't just important for the get-up-and-go phase of business ownership. Throughout the tenure of a cannabis business, owners will find themselves in need of cash to cover unexpected expenses or to move into new and/or profitable ventures. As with a personal credit score, a cannabis businesses' business credit score will play a major role in access to loans from banks. It's wise to always pay off existing credit at the end of particular statements, as this boosts your business' credit score and makes more money available to you.
You can get pre-approved for cannabis industry financing through Canna Business Financing. This pre-approval gives your cannabis business a huge leg up in a competitive market, guaranteeing access to the startup and maintenance funds that will be a lifeline for your company. As your business succeeds, furthermore, Canna Business Financing can help you make smart decisions about spending and investing to make certain you leave a mark in the industry.
Term Loans vs. Lines of Credit
How to Qualify For a Term Loan
Tips for Building Credit to Get a Cannabis Business Loan
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