marijuana financing

Marijuana Financing: How Do Cannabis Loans Work?

Financing a marijuana business can be more of a challenge than getting financing for many other business industry types.  Medical and recreational marijuana is now legalized across many states throughout the U.S. and that number is growing.  However, since it is still illegal under federal law, it’s more difficult for owners of Marijuana Related Businesses (MRB) to apply for loans, set up merchant banking accounts, and process credit cards to grow their business. 

Although financing may be limited, there are options available.  You have to get a little creative when the more traditional options don’t pan out.  Debt capital sources like Upwise Capital think outside the box, whether you need money to expand your business,  start up capital, or funds to purchase new equipment – there are many ways you can go about it.  

What is a cannabis loan?

Since traditional banks will not lend to the cannabis industry until it’s federally legalized or the Safe Banking Act is passed, finding a reliable capital source can be like finding a needle in a weed farm.  A cannabis loan is typically from a private debt capital source that specializes in lending to the Marijuana, Hemp, CBD, Kratom and Psychedelic industries.  The cost of capital in the debt capital markets for a cannabis small business loan is typically between 8% to 22% depending on certain underwriting criteria and the product type.   The term of the loan, payment structure, lenders origination fee, and other factors will vary depending on the type of loan product and use of funds.  

What cannabis lenders look for?

Before you start your search, it’s important to understand what a cannabis lender is looking for.  Below are a few important factors an underwriter would evaluate: 

  • The borrower’s credit score
  • Liquidity and cash on hand 
  • Capital Contribution or “Skin in the game”
  • Your Canna Experience Level
  • Assets or Collateral the Business has
  • Your Team and Sponsors

A cannabis lender would ideally look for loan candidates with a license, a great level of experience and a solid business plan.  Also, having access to capital, liquidity to service the debt, and positive cashflow are important.  If the business is operating, assets such as real estate or unencumbered equipment can be used as leverage.  Cannabis small business loan lenders typically will specialize in a specific sector of the industry such as distribution, cultivation, processing, or retail.  

What it can it be used for?

A cannabis small business loan can be used for a variety of capex and opex uses to help grow your business from the ground up.  If you’re a start-up cannabis business that was issued a license in a new state, the only options available are equipment financing and construction financing to build out your facility or operation.  

A more established MRB operator can use the loan funds for any business use such as hiring new employees, inventory purchases, equipment leasing, operating expenses, building and working capital.  Your use of funds is the most important aspect when a credit team is evaluating a potential borrower.  

The Upwise Difference

What differentiates our firm from everyone else in the marketplace is we understand cannabis value and lend on real estate based on the as-completed cannabis value (typically at 65% -70% LTV).  Our many years of cannabis financing experience and knowledge of the industry gives us an edge above our competitors.  Every loan we provide is unique and custom-tailored to the specific needs of the individual business. Working capital can be utilized for various purposes such as, launching a new product, securing a new location or improving your facility.  If you are an established business, you can leverage your different asset classes in order to secure debt capital.  Asset classes consist of real estate, equipment, the license, inventory, purchase orders or off take agreements, intellectual property or patents, and business revenue.     

When to get a cannabis loan?

A cannabis small business loan can be secured at any time during the lifetime of your business.  Additionally, if you’re a start-up cannabis business with no experience, you’re able to secure a loan against property owned or to lease equipment. 

Cannabis Debt vs Equity Financing

Another option you may be considering, is equity vs debt financing to fund your marijuana business. With equity financing, you will be giving up ownership percentage in your company in exchange for the capital you need.  Most marijuana related businesses (MRB’s) we come across do not want to give up equity, because the revenue growth potential is so high within this industry.  Once the business becomes profitable, the investor will be entitled to the profits for the life of your business, which can be a huge downside to business owners.   

Debt financing, just like traditional loans, lines of credit and other financial products requires you to make payments along with interest and fees.  Since traditional bank loans and SBA loans are off the table, alternative lenders like Upwise, focus on the marijuana industry and have made it easier to receive the capital you need.  While rates and terms may not be as favorable as traditional financing, if you have a strong credit score and revenues combined with a good business plan – this can help you score affordable loans to fund operations or expansion of your marijuana business.

What types of cannabis loans are available?

First, you also need to consider what type of financing you need for your marijuana business.  Whether you need a dispensary loan or financing to purchase new grow equipment, Upwise has options available for you.  Also, non-dilutive working capital is the best alternative if giving up equity is not appealing to you.  As a business owner, you retain all the equity and ownership in your business.  Therefore, once the capital is paid off, you don’t have any ties to the lender or investor.

A borrower can find non-recourse and full recourse loans available in the cannabiz debt market, however non-recourse will usually cost more.  Some sources may require a personal guarantee from all sponsors with more than 20% ownership and others may just require a corporate guarantee, UCC, or blanket lien on the business.

Below is a list of the types of debt capital solutions available to CRB operators:

  • Equipment Financing
  • Cannabis Real Estate Secured Loans
  • Unsecured Non-Dilutive Loans
  • Construction Financing
  • Sale-Leasebacks
  • Purchase Order Financing
  • Inventory Financing
  • Convertible Debt
  • Senior Secured Debt Facilities
  • Acquisition Loan

How to get a cannabis loan

Before applying for a cannabis small business loan, you should research the type of loan you are interested in applying for.  Make sure to get your business and personal finances in order because you will need to show proof of your ability to pay the loan back.  

We suggest setting up a phone call with one of our financing experts to discuss your specific business and it’s needs.  A marijuana dispensary vs a marijuana greenhouse will have different needs and require a different approach to underwriting your loan.  If you’re a start up as opposed to an established CRB company – you will also have different needs and require a unique approach.  Make sure to vet your sources and work with a reputable firm that has experience raising debt capital in the canna industry.

The Process

  1. Prepare your documents and team
    • See below a list of documents you will need
  2. Schedule a call with Upwise
    • On this call we will discuss your specific needs and use of funds
    • We strategize which products will be the best fit for you
  3. Sign a mutual NDA
    • This protects both parties and allows us to share sensitive information and documentation freely
  4. Start the Underwriting Process
    • This is the analysis of your ability to service the debt and may include: due diligence, third party reports, appraisals, surveys, environmental phase 1 & 2, UCC and lien searches, etc.
    • During this phase, underwriting may request additional documents needed to issue a term sheet
  5. Terms Sheet or Loan Agreements Are Issued
    • These documents would outline the loan amount, rates, term, and fees
    • If both parties agree to the terms, the funding process will begin.

Documents Needed for a Cannabis Loan

Finally, be prepared.  Have all your documents ready to provide business information on your key management personnel and a list of all licenses held by your company.  Below is a list of typical documents you’ll need to apply:

  • Tax Returns 
  • Financials – P&L and Balance Sheets
  • Five Year Pro Forma P & L
  • 6 Months of Business Bank Statements
  • Personal Financial Statement for all owners
  • Cap table, Corporate Structure, Operating Agreement
  • Licenses
  • List of Equipment & Assets
  • Appraisals or Third Party Reports
  • Real Estate & Debt Schedule
  • Executive Summary & Deal Summary 
  • Completed Application

Once you’ve got your stuff together, you’re ready to apply and get started in the approval process for a cannabis loan!  Make a wise choice when choosing your debt capital provider, while determining the right loan for you.

How to Apply For a Cannabis Loan

We’ll set up a meeting with a financing specialist and your key decision makers.  On this introduction call, we will learn more about your business and it’s funding needs to come up with a plan and get you financing in no time.  

So…What do you think? 

We want to hear from you.  What do you think of this article and was it helpful in your search for ways to fund your Hemp, CBD or Canna business? 

Let us know by leaving a reply below.   Feel free to share this article on your social media. 


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  1. Tombstone Karl

    When business owners are turned down by traditional funding sources like banks or credit unions, account receivable financing products can be set in to fill the gap. Speed to access capital as well as flexible credit requirements make this financing option desirable for many businesses. So, choosing the right cannabis business loans for your marijuana operation requires some research and weighing the options.

  2. aliya

    Great post! Thanks for clearing things up

  3. Peter DeSimone

    Do you work with commercial loan brokers?

  4. Karl Tombstone

    Its not even one of those situations like ‘if it was easy everyone would be doing it’, the restrictions are so specific and harsh that make it very hard for anyone to grow it on an industrial scale, unless you have lots of time, money and political power to get past all of the hurdles involved in the cannabis industry, you need to always be ready for the unpredictable to happen which is incredibly difficult. You can plan for cannabis business startup costs, but when you hit a snag, it could mean the end of your business.

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