cannabis business loans

The Ultimate Guide to Cannabis Business Loans


The cannabis industry is continuously growing, with many states making cannabis legal alongside its sales for medical and recreational purposes. And there have been many opportunities for cannabis business financing loans coming from the growing cannabis market.

Entrepreneurs are looking to exploit this new area as soon as their state decriminalizes or legalizes cannabis use, capitalizing on the opportunity to set up their businesses. Due to the many legal troubles surrounding the cannabis market, it is difficult to access hemp business loans through conventional methods like banks.

Even in California and Colorado where it is hard to drive a mile and not see a marijuana dispensary.  Here, laws support its sales and use, yet it is still difficult or almost impossible to access cannabis startup loans from federally insured depository institutions (FDIC Insured).

Do not be deterred; there is a good program for you to make cannabis business financing work for you.  Importantly, there is a lot of cannabis-specific knowledge you should know before accessing a cannabis loan.  So read on, as we’ve compiled the ultimate guide to getting cannabis business loans.

What is a cannabis business loan?

cannabis business loan guide 2

Since traditional banks and credit unions will not lend to the cannabis industry until it’s legal on the federal level or the Safe Banking Act is passed, finding a trustworthy alternative financing source can be like finding a needle in a weed farm.  A cannabis business loan is typically from a private debt capital source that specializes in lending to the Marijuana, CBD, Hemp, 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 requirements and the product type.   The term of the loan, amortization schedule, lenders’ origination fee, and other factors will vary depending on the type of loan product and use of funds.  

What can a cannabis business loan be used for?

A cannabis business loan can be used for anything that might come your way.  For example, cannabis equipment such as Heating & Cooling, Lighting, fixtures, seeds, and also extraction equipment. The loan may be used for hiring more management and staff. For cannabis businesses that have large plots of land may need large farming equipment for harvesting. Cannabis businesses that don’t grow their own cannabis may use the business loan financing for re-stocking on inventory from their supplier. Cannabis business funding can be used for remodeling or to simply open up a new location, a cannabis loan can be used to renovate your project.

Opex vs Capex

You can break down the use of funds for a new cannabis business into two categories, Opex and Capex. Opex is your operating expenses such as rent, payroll, utilities, marketing expenses, and all other operational expenses. Capex is your capital expenditures such as equipment, real estate, licensing cost, construction cost, and all other hard capital costs to get your operation going. The use of funds will determine the type of cannabis business loan to apply for.

Types of Cannabis Businesses We Fund

  • Cannabis Dispensaries
  • Cannabis Manufacturers & Wholesalers
  • Cannabis Processors
  • Cannabis Cultivation equipment
  • Medical Marijuana Products
  • Cannabis & CBD Infused Products
  • Cannabis Accessories
  • Hemp Products
  • Cannabis Ancillary Services

The Advantage of Working With Upwise

What separates our firm from everyone else in the marketplace is we understand the ins and outs of the value of the Marijuana industry.  Therefore, we also lend on real estate based on the as-completed cannabis value (typically at 65% -70% LTV or LTC).  Our numerous years of cannabis financing experience and knowledge of the industry give us an advantage over the competitors in our field.  Every loan we provide is unique and custom-tailored to the specific needs of the individual business.

Working capital can be utilized for many alternative purposes.  Such as, launching a new product, securing a new commercial real estate, acquisition of dispensary, or improving your facility.  If you are a well-established business, you can leverage your different asset classes and sales in order to secure debt capital.  Asset classes consist of inventory, purchase orders or off-take agreements, real estate, equipment, the license, intellectual property or patents, and business revenue.    

Medical Marijuana Dispensary- Recreational Marijuana- Marijuana Industry

Why are cannabis business loans difficult to close?

Forty-two states have allowed marijuana to be legal for medical use, while approximately half of Americans live in 1 of 18 states that legalized recreational cannabis use. You think that with so much effort toward decriminalizing cannabis, access to cannabis business loans should be easy. But it is not so.

Unfortunately, cannabis financing is still illegal at the federal level. Hence getting a cannabis business loan is a daunting task. A bank cannot legally give out funds that are tied to cannabis sales. You may need to be creative before accessing small business loans for your cannabis business, but you can’t just walk to your bank and fill a form requesting a loan for your cannabis business. Make sure to do your research before applying for a business loan for your cannabis-related business.

What do cannabis lenders look for?

First, before you start your search for lenders, it’s important to recognize what a cannabis lender is looking at as funding criteria.  Below are a few key important factors an underwriter will look for when evaluating a cannabis business for a loan: 

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

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

Can cannabis businesses grow through banks?

Federal laws regulate all the big banks and credit agents, and in federal laws, all transactions related to cannabis funding may they be recreational use or medical use are illegal. Even a state-owned bank is still regulated by the federal government such as the FDIC or federal reserve.

Also, even if you use the money to buy a property or market your business instead of buying supplies for your cannabis business, the federal government will consider it money laundering. And banks are subject to the same regulation of money laundering that affects individuals too.

The Problem

It may be easier to work with community credit unions, but any transaction that is more than 5000 dollars is flagged, mainly if the funds have been used for cannabis sales.

This is the primary problem for business owners in the cannabis industry. Even if you engage in ancillary activities to the sales of cannabis products you must encounter these regulations.

There is, however, a silver lining, the new legislation to make cannabis legal, the SAFE Banking Act, which was passed in December 2019 by the House of Representatives, can allow banks to take part in the cannabis industry legally. But the bill is yet to pass the Senate, where it has a lot more opposition.

Can cannabis businesses use commercial lenders?

It is possible to use commercial lenders to support your cannabis business. The problem with most cannabis businesses is that they barely know where to look. The cannabis industry is full of business owners looking for cannabis business funding, but they are new to the industry, and not many entrepreneurs know where to look. The first commercial lender to cannabis-related businesses was licensed in 2018 and since then the cannabis industry has exploded with lenders but business owners weigh their funding options for business loans.

Marijuana Business-Cannabis Business Loans-Cannabis business loans- cash advance loans

The two main types of financing options available to cannabis entrepreneurs are debt funding and equity funding.

Debt funding involves funding your business by offering a business credit card or taking out loans. The lender is paid back the total amount plus interest. Equity funding, on the other hand, involves the use of company shares to pay back the capital. In exchange for the capital, the investor will receive an equity ownership percentage in the business. The investor gets their money back in profit from the business operations through partner distributions or shares in profits when the company is sold. Equity investments can be structured in many different ways.

Nevertheless, cannabis business loans fall into multiple different categories.  In this article, we will focus on the debt side. 

Types of Financial Options Available to Cannabis Business Owners

Private loans

Private loans are available for non-bank lenders and with a typical interest rate of 8-25%. The lending term is usually 1-5 years. The funds from this kind of loan are usually available as soon as seven to fourteen days. Lenders of private loans usually prefer those growing and manufacturing the cannabis product instead of funding the dispensary themselves. Private cannabis loans can be secured or unsecured.

Cannabis Construction Financing

If you are a small business owner with a physical location and you need to build a new dispensary or remodel an existing one, then a construction loan can be used to finance your construction project. Or if you need a business loan for construction equipment, see our financing and leasing options. Cannabis construction loans are typically used to build out your cultivation, processing, distribution, or retail facility.  Ask about how Upwise can lend based on cannabis value.  

Interest Rates: 11-16%

Terms: 18 Months – 3 Years

Max Loan Amount: $500 Million

Speed: As Fast As 30 Days

Read more about the Construction Financing program

Cannabis Real Estate Loan

If you’re looking to purchase land on which to grow cannabis or commercial real estate in which to house your business, a real estate loan may make the most sense for you. Bridge loans, hard money loans, and shorter-term mortgages are all available to cannabis companies and medical marijuana dispensaries. Interest rates typically range from 8 to 20 percent and terms are 1 to 5 years in length. Funding takes approximately 30 to 60 days to obtain from the time of application.

Interest Rate: 8-16%

Terms: 1-25 Years Amortization (Typically 2-5 Years)

Loan Amount: $150K – $500 Million

Speed: As Fast As 2 weeks

Learn more about Cannabis Real Estate Loan

Cannabis Sale-Leaseback

A cannabis sale & leaseback is when a company sells its real estate to lenders or investors for cash to use for operational costs. The property is then leased back, like a typical lease agreement to the Cannabis company, as a tenant (rent escalators can be included in the lease as well). The money you get immediately from the sale of your equipment or facility can be used to grow your business, as opposed to being tied up in your real estate equity. In other words, the lender or sale-leaseback REIT is now your landlord. A cannabis business can leverage or sell cannabis equipment on a sale-leaseback typically at 70-80% LTV.

Initial Base Rent: 8% – 16% on total investment

Terms: 10 to 30 Years

Target Amount: Up to $150 Million

Speed: Typically 30-60 days

Learn more about Cannabis Sale-Leaseback

Cannabis Equipment Financing

Equipment financing is available for those who grow cannabis but need to buy some farming equipment. Cannabis equipment financing is the best option for those who need the farm equipment but don’t have the purchasing power. These loans usually hold terms of 1- 7 years and interest of 8 to 20 percent.

Interest Rates: As Low as 9.59% (Typically 15%-18%)

Terms: 1 – 10 Years (Typically 3-5 Years)

Max Loan Amount: Up to 100% of Equipment Value

Speed: As Fast As 2 weeks

Learn more about equipment financing

Non-Dilutive Debt Capital

Cannabis dispensaries may find it challenging to get funding; hence Non-Dilutive debt capital, also considered a cash advance is the best option. It is not a loan, yet a purchase of your future revenues. The funding is given quickly and ranges from 3 to 24 months with an average rate of 1.10 to 1.36.

Non-Dilutive debt capital helps to give you a robust cannabis working capital solution to use for a diverse range of business purposes. Utilize a non-dilutive business loan for almost any use, and don’t give up any equity in your company

 Factor Rate: 1.10 – 1.36

Terms: 3-18 Months

Max Loan Amount: $10 Million

Speed: As Fast As Same Day

Read more about non-dilutive debt capital

Invoice Financing

Cannabis businesses have a long lead time on open invoices, often waiting between 30 and 90 days to receive payment on an open invoice. This cash flow lag can be problematic because businesses are left hanging in the balance. Invoice financing is a type of loan that offers partial repayment on outstanding invoices. Invoice financing is a popular option for cultivators, distributors, manufacturers, cannabis brands, and ancillary companies because it is flexible and provides consistent cash flow. Using this type of financing, you’ll only accrue interest when you use the funds, and you can borrow for up to 90 days. Fees are approximately 2.5 to 3.5 percent of the invoice amount and are assessed every 30 days.

Interest Rate: 8% – 30%

Terms: When Customer Pays Invoice

Max Loan Amount: Up to 100% of Invoice Amount

Speed: As Fast As Two Weeks

Read more about Invoice financing

Cannabis Business Acquisition Loan

A Cannabis Acquisition Loan allows you to buy existing and hopefully profitable businesses. You can buy out an existing partner or purchase a well-established business. For this type of loan, it’s best to be purchasing a thriving company, that will be easy to prove a low risk to the lender.

Factor Rate: 1.10 – 1.49

Terms: 3-24 Months

Max Loan Amount: $50 Million

Speed: 30-60 days

Apply Now for a Cannabis Business Acquisition Loan

Line of Credit

A line of credit (LOC) for your business gives you access to a pool of funds to draw from when a business owner needs capital. Unlike a traditional business loan, you have the flexibility to borrow up to a set amount (typically anywhere from $50,000 to $500,000), repaying only the amount you withdraw, with interest. You can draw on your small business lines of credit to handle cash gaps, get more working capital, meet payroll, purchase supplies or materials, or address almost any other emergency or opportunity.

Interest Rate: 7% – 25%

Terms: 6 months-2 years

Max Loan Amount: $5-$500k

Speed: As Fast As Same Day

Read more about Lines of Credit

Inventory Financing

Invoice financing, often called accounts receivable financing, is a type of asset-based financing solution that allows business owners to free up unpaid invoices. Invoice financing companies advance your cash collateralized by your accounts receivable, giving you an excellent way to put money back into your business. With invoice financing, you can get a fast advance of about 85% of the value of your invoices, with most of the other 15% paid to you later.

Interest Rate: 1% – 3% Per Month

Terms: Up to 120 Day Terms

Target Amount: $200K – $10 Million

Advance Rate: 100% to the Clients Vendor

Speed: As Fast As Two Weeks

Read more about Inventory Financing

Purchase Order Financing

Purchase Order Financing or Invoice Financing is one of our options available for businesses that do not have the working capital needed to fulfill customer orders. Cash flow problems happen in many small businesses, making it impossible to cover the costs of their purchase orders. Instead of turning away business, Purchase Order Finance allows your businesses the working capital needed to fund orders with little to no upfront capital.

Interest Rate: 1.5% – 3% Per Month

LTV: 75-100% of Purchase Order

Max Loan Amount: Up to $10 Million

Speed: As Fast As Two Weeks

Read more about Inventory Financing

Convertible Debt

Convertible debt is a form of short-term debt that converts into equity, traditionally in conjunction with future rounds of financing; in turn, the investor would be loaning money to a small business, and instead of a return in the form of principal plus interest, the investor would receive equity in the business.

Senior Secured Debt Facilities

A Senior Secured Debt bank loan is a debt financing obligation issued to a company by a bank or similar financial institution and then reworked and sold to investors. The reworked debt obligation consists of more than one loan. Senior Secured Debt loans hold legal claim to the borrower’s assets above all other debt obligations. Senior debt is typically secured through private debt firms, hedge funds, family offices, or smaller banks. Upwise has some banks that are offering 5% – 7% interest rates over 5 years with a 25-year amortization schedule to profitable and stabilized cannabis facilities, which are full recourse with a blanket lien on all business assets.  Senior debt loans are made for established and profitable cannabis businesses.

Cannabis Business Funding-Cannabis Business Loans-Line of Credit

How much money can I borrow?

As with any loan, the credit limit extended to a cannabis small business will depend on your capital needs and credit score profile, which will be based on the submission of recent financial records (balance sheets, income statements, and bank statements), your credit score, management personnel information, and more. Loan sizes vary depending on the type of cannabis business funding you are pursuing and the reason the cannabis business funding is needed, but it may be as little as a few thousand dollars to several million dollars. A full range of alternative lenders will offer everything from equipment financing, real-estate loans, with various amounts and financing options

Which type of funding is best for my cannabis business?

Your business model and the amount you need to borrow will determine this. As a cannabis business owner, you have to know that no matter the type of funding you do, you should ensure to utilize such funds to help your business grow since you have just a limited alternative of funding.

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 cannabis equipment, and if you are looking to find cannabis business financing for a build-out we can also secure working capital for that as well.

We suggest setting up a phone call with one of our cannabis business financing experts to discuss your specific business and its needs.  A marijuana dispensary vs a marijuana greenhouse will have different needs and require an alternative approach to underwriting your loan.  If you’re a start-up as opposed to an established CRB business – you will also have alternative 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 cannabiz industry.

The Cannabis Funding Process

  1. Prepare your documents and team
  2. See below a list of documents you will need
  3. Schedule a call with Upwise
  4. On this call, we will discuss your specific needs and use of funds
  5. We strategize which products will be the best fit for you
  6. Sign a mutual NDA
  7. This protects both parties and allows us to share sensitive information and documentation freely
  8. Start the Underwriting Process
  9. 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.
  10. During this phase, underwriting may request additional documents needed to issue a term sheet
  11. Terms Sheet or Loan Agreements Are Issued
  12. These documents would outline the loan amount, rates, terms, and fees
  13. 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 businesses.  Below is a list of typical documents you’ll need to apply:

  • Tax Returns 
  • Financial Statements – P&L and Balance Sheets
  • Five Year Pro Forma P & L
  • 6 Months of Business Bank Statements
  • Personal Financial Statement for all business 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 business loan!  Make a wise choice when choosing your debt capital provider, while determining the right loan for you.

Overview of Cannabis Loans

There are many alternative programs when it comes to Cannabis business funding. You can secure large business loans that extend up to 5 years or get smaller ones for cash or equipment specifically for your Marijuana, Hemp, and CBD needs. No matter what you’re using the funding for, it’s important to know what the funds will be used for and how they will help in the growth of the business, as well as what you’ll do should the retail loan process not work out. It’s important to look at retail business funding from every perspective!

Start your application today online. Simply fill out our Funding Application Form right now on our website. Or please call us on the phone at 646-837-5522 or email us at [email protected] to get access to cannabis business financing for retailers within 24 hours. We will let you know what documents will be required at the time of your application.

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 Cannabis business loans? Did it help you better understand the Subject?

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


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