How Can Cannabis Businesses Secure Funding?

The cannabis market is expanding, with legal marijuana sales anticipated to total $51.9 billion in the United States alone by 2026. However, despite its fast expansion, cannabis firms continue to face severe financial challenges. Traditional banks are still unwilling to enter the market owing to government restrictions, forcing businesses to negotiate a complicated and changing funding landscape. Fear not, ambitious entrepreneurs!

Funding gap

Before we go into remedies, let's first establish what's causing the issue. Traditional lenders, like banks, are mostly barred from financing cannabis enterprises owing to marijuana's Schedule I classification under federal law. This categorization considers marijuana to have a high potential for addiction and no currently approved medical use, despite a rising corpus of studies emphasizing its therapeutic advantages. Until federal legalization happens, this designation remains a substantial barrier to obtaining traditional loans.

Beyond the loan

While the lack of regular bank finance is a difficulty, funding is not impossible. Here are some of the main alternative funding options for cannabis businesses:

Angel investors and venture capital

High-Net-Worth Individuals (HNWIs)

HNWIs are often enthusiastic about the industry's prospects and can give critical early-stage capital. Prepare to deliver a convincing company strategy with great market potential.

Venture capital firms

These organizations may invest in established businesses with clear development plans since they are looking for high-growth opportunities. Prepare for thorough due diligence and maybe lose some power.

Private equity and debt financing

Private Equity

These corporations invest in established enterprises that have demonstrated traction and profitability. Expect strict financial constraints and possible equity dilutions.

Debt financing

While tough, some specialist lenders provide secured loans or lines of credit. Prepare for high interest rates and strict collateral requirements.

Crowdfunding

Equity crowdfunding

Platforms such as Fundrise and Wefunder enable you to raise funds from a large number of individual investors in return for shares. Prepare for a transparent and open campaign process.

Debt crowdfunding

Various kinds of platforms enable you to borrow directly from the crowd at reasonable interest rates. Understand the creditworthiness and payback terms.

Alternative lenders

Real Estate Investment Trusts (REITs)

These companies specialize in financing cannabis real estate properties like grow facilities and shops. Expect property-specific considerations and a thorough review of your business strategy.

Family offices

Wealthy families with an interest in the sector may offer money, which is usually customized to specific needs and beliefs. Network strategically and guarantee synergy with their investment requirements.

Alta Real Estate Fund is the perfect option if you are looking for a company that offers cannabis financing, cannabis real estate lenders, or financing for cannabis. They understand their client’s businesses and needs and come up with creative tailor-made finance structures that make the company’s performance simpler and more efficient. Write to ir@alta-financial.com or visit their website https://www.alta-fund.com/.