Cannabis Startup Loans Offers Cannabis Equipment Financing Options
Cannabis Equipment Financing
Whether your goal for 2022 is to start a new business or expand your existing cannabis sales, there are varied ways to get the essential equipment and Cannabis Equipment Financing. First, consider if new or used equipment is preferable in your situation. Obviously, new equipment comes with the latest features and peak performance. But, there are deals to be had on older, gently used equipment. Many companies specialize in selling used cannabis business equipment that they fix up and warrantee. If you don’t need something shiny and new with all the bells and whistles, choosing used might be an easy way to save your business some money.
Next, decide if buying, leasing, or financing your equipment will work best for your company. Leasing is ideal for items that need to be replaced frequently. Buying can be better for something you plan to use long-term. But, just because you have the cash to buy something outright doesn’t mean you should. That money may be better spent elsewhere depending on your business goals. Business loans allow you to pay off equipment little by little with a low interest rate. Refinancing existing equipment can give you access to cash when you need it. It can also result in lower loan rates and better terms depending on market conditions.
What Are the Financing Rates for Cannabis Equipment?
Cannabis industry equipment loans and leases will experience higher interest rates than equipment financing for a more traditional business. For example, conventional equipment loans generally charge about 5-8% interest depending on market rates, down payment amount, and the borrower’s credit history. Because the marijuana industry is riskier, rates typically range around 8-25%. Since most cannabis financiers are alternative lenders, there is little regulation and rates can vary widely.
Financing Options for Cannabis Equipment Loans
Because of strict federal regulations, obtaining traditional bank loans for cannabis equipment financing from large national banks is essentially impossible. The cannabis business will also likely appear on the restricted industry lists of many online lenders.
You also won’t be able to obtain a business credit card from these sources. Additionally, scoring anSBA loan is improbable in this arena. However, private lenders, venture capital investors, and credit unions that function on a regional basis may be willing to loan you capital in areas where cannabis is legal.
Specialty finance options exist that concentrate on the marijuana industry. These lenders offer a financing program for businesses like medical cannabis and cannabis dispensary companies. Marijuana-specific alternative lenders are familiar with the terrain and know how to navigate federal and local regulations. They can help businesses in the space with a variety of cannabis equipment financing needs, including working capital, bridge loans that smooth cash flow, invoice financing, and merchant cash advance loans. Some of these lenders also offer entrepreneurs commercial real estate financing for their cannabis business.
If loan funding is not in the cards, your cannabis business can lease equipment. Leasing has some advantages, including lower monthly payments, more accessible capital, and tax benefits.
Common Cannabis Equipment That Can Be Financed or Leased
Cannabis growers in particular require a lot of specialized equipment to operate. Some of the most common pieces that entrepreneurs choose to finance or lease include:
- HVAC units: Cannabis grow rooms have specialized HVAC needs to maintain temperature and humidity for healthy crops. Since the HVAC has to run constantly to keep the room at consistent levels, it’s important that these units are energy-friendly and also assist with airflow to mitigate strong odors.
- Marijuana lighting equipment: For indoor grows, perfect artificial lighting is essential. Grow lamps can make or break a harvest. Therefore, it’s important for cannabis companies to invest in the best lighting technology they can afford.
- Security equipment: The cannabis industry is highly controlled, so businesses in this arena need to take security very seriously. In fact, there are regulations at the state and federal levels to ensure cannabis products are safeguarded. Cannabis growers can lease or finance the necessary equipment, including video surveillance, alarms, and digital storage.
- CO2 extractors: These machines extract oil from plant material and are necessary to create products containing THC or CBD. Since most have a five-figure price tag, they are the ideal type of equipment for business financing.
Types of Marijuana Equipment Financing
Depending on how you purchase the equipment for your marijuana business, different kinds of financing may be available.
At a dealership: Growers may find purchase, lease, and refinancing options on both new and used equipment through dealers that sell farm equipment. Terms generally last 2-10 years. Businesses will find easy applications for financing and leasing at dealerships as well as quick decisions based largely on your credit score.
Through a private party: Purchase and lease options are available on farm equipment sold through private party transactions. This type of equity financing is generally available on items with a minimum purchase price of $25K before down payment. Monthly interest payments are usually low and “ag-friendly.”
At auction: Auctions are ideal places to score good-quality used equipment for farming and retail businesses like a marijuana dispensary. The minimum purchase is about $25,000 (prior to down payment) and terms are aimed at meeting the unique needs of agriculture-focused companies.
Is Used Cannabis Equipment Financing Available?
Some lenders may prefer to stay away from funding pre-owned equipment purchases in any industry, simply because of the higher risk. However, there are specialized lenders who offer this option – You may just have to do a little extra searching to find them.
Credit Requirements for Cannabis Equipment Financing
Since the equipment itself serves as collateral, credit requirements might not be as stringent when it comes to a cannabis equipment lease or funding. With a fair credit score (around 650), you should be able to obtain an equipment loan, though you won’t have the most attractive interest rates. As your score increases, rates generally go down proportionally.
How We Can Help You
Our unique startup cannabis loan product is very useful in obtaining Cannabis Equipment. Contact us today for more information. Fill out this short contact/apply form for a callback today.
For more information about our Cannabis real estate financing read here