Cannabis Business Loans for CBD and Hemp In 2020
One of the greatest challenges for a business starting in the cannabis industry is funding. The 2018 Hemp Farming Act made it legal to produce hemp-based products, including products utilizing CBD (cannabidiol) extracted from hemp. This new legality doesn’t mean it’s easy to set up a CBD shop though. Many banks and traditional lenders are still hesitant to provide CBD business loans, hemp business loans and cannabis business loans. Partly because of its close association with cannabis which is still federally illegal. Also partly because of the uncertainty of federal oversight. However, if you are looking to start or invest in a new CBD business, there are some available options for CBD business loans, hemp business loans and cannabis business loans you should consider.
With the recent federal legalization of hemp and CBD products and the increasingly frequent state legalization of cannabis, the cannabis industry is one of the fastest growing in the world. Cannabis sales in the US are currently at $10.8 billion. The National Institute for Cannabis Investors projects sales to grow to $100 billion in the next five years. BDS Analytics, and industry analyst, estimates that CBD sales alone will reach $20 billion by 2024. With such a huge growth potential, many private lenders, such as Cannabis Startup Loans, are taking the opportunity to invest in the industry where traditional banks and lenders are hesitating. That’s not to say that a traditional bank loan isn’t possible, but working with a private lender is probably going to be the best option for many entrepreneurs looking for CBD business loans, hemp business loans and cannabis business loans.
Traditional loan from a bank
It’s possible to go the traditional route and get CBD business loans/ hemp business loans / cannabis business loansfrom a bank or traditional lender. However, you’ll likely run into a few roadblocks going this way. Cannabis, although legal in several states, is still federally illegal in the US. Therefore, banks and institutional lenders who are federally insured won’t provide CBD business loans/ hemp business loans / cannabis business loans for any business associated with it. This changed somewhat with the 2018 legalization of hemp and hemp-based products, but it can still be difficult to find a lender willing to provide CBD business loans/ hemp business loans / cannabis business loans.
The new federal guidelines define hemp as cannabis sativa plants which possess less than 0.3% THC and any levels of all other Cannabinoids including CBD. To stay within the bounds of this law, hemp farmers only grow strains of cannabis sativa known to have low THC content. However, even among those strains, crops can be produced that tip over the 0.3% line. While these crops aren’t used in the manufacturing of hemp-based products, working so close to the edge of the law makes banks nervous about providing CBD business loans/ hemp business loans / cannabis business loans.
Additionally, because the hemp industry has only recently been legalized, federal oversight branches such as the FDA (Food and Drug Administration) are still working out the kinks in their operations. Banks are hesitant to get involved in a business where they might have new oversight rules every year and prefer to wait until a system has been established and settled.
Alternative CBD Business Loans, Hemp Business Loans, and Cannabis Business Loans
Just because you can’t find a bank to offer you CBD business loans, that doesn’t mean it’s impossible. CBD, hemp, and cannabis business owners have been finding other ways of financing that don’t rely on traditional lenders. One option is called a Bridge Loan. These are loans intended to bridge a gap in financing rather than provide it all. Bridge loans are short-term loans that allow businesses to continue operation while they seek more permanent financing. They are typically high interest and probably aren’t the ideal solution for your CBD business or other Cannabis Business.
Another option available if you’ve already got a business up and running is a Merchant Cash Advance. This is basically an advance on upcoming credit and business debit transactions. Like a bridge loan, this isn’t a permanent financing solution. It is a way to keep your business afloat while you find more permanent funding. The interest rates however can be astronomically high so use caution.
The most common and best option for businesses starting out is a private loan. This is a loan from a private lender that functions much the same as a business loan from a bank. CBD sales are estimated to reach $20 billion by 2024. Many private lenders are taking the opportunity to invest in the industry. If you are looking for CBD business loans/ hemp business loans / cannabis business loans to fund your startup, a private loan is likely your best option.
Cannabis Startup Loans
Cannabis Startup Loans can help you obtain CBD business loans, Hemp Business Loans, and Cannabis Business Loans. We work use our experience and credibility to obtain funding from our network of banks, private lenders, and credit unions. While many private lenders are hesitant to fund startups, we are ready to help you jump into the cannabis industry. Our unique cannabis business loan product is perfect for entrepreneurs who are ready to get started but don’t have the support they need to get off the ground, or for owners of an existing cannabis business who need a little help to get to the next level.
Often private lenders require several things upfront, such as a proof of income, before they’ll agree to a loan. This makes it difficult for many startups to get the funding needed. The unique thing about our program at Cannabis Startup Loans is that we only require a good personal credit score (700+ FICO credit score). We are prepared to fund startups that don’t have a steady cash flow already in place. Some private lenders only fund the production and/or sale of CBD products and won’t fund growing operations. However we don’t require that our CBD business loans are spent on specific things.