Funding for Cannabis Industry

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FUNDING FOR CANNABIS INDUSTRY

Valued at 10.8 billion in 2021, the U.S. cannabis market size is predicted to expand at a compound annual growth rate of 14.9% from 2022 to 2030 (source: grandviewresearch.com). Often used in cosmetic, pharmaceutical, and food and beverage industries, cannabis in the U.S. is currently witnessing a rising acceptance due to its extensive use in medical purposes. Because of the medicinal properties of cannabis, it is used to treat various chronic conditions like chronic pain and chemotherapy-induced side effects like nausea. Also, the steady legalization of medical cannabis is considered one of the primary growth-initiators of the cannabis business in the country.The Food and Drug Administration(FDA) has now approved the use of various cannabis-derived drug products for the treatment of multiple incessant diseases and post-therapy carryovers. Besides, today, an increasing number of jurisdictions have established lawful frameworks for the non-medicinal use of cannabis among adults for social, religious, and cultural purposes, and hence, consumers, these days, are no longer restricted to smoking flowers with joints and bongs, but consume a wide variety of cannabis-infused edibles and use hemp-based skin-care products.

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      Primary Growth-Initiating Factors

      The removal of cannabis from “The Controlled Substance Act of 1970” is expected to boost the cannabis business in the coming years. According to various survey reports, approximately 64% of U.S. adults are now familiar with CBD products and one-third of the population of America uses CBD. This proves the changing perception of consumers toward the consumption of cannabis-based products. Considering consumers’ positive outlook on cannabis, more companies, these days, are getting into cannabis businesses in the country. 

      Some of the primary factors that are immensely contributing to the growth of the industry are the benign cultivation norms, favorable climatic conditions, and the legalization of medical marijuana in states like Florida, Oregon, Nevada, California, Washington, and Colorado, which are the large-scale producers of cannabis. The consenting guidelines, passed by the FDA, regarding the perpetuation of the R&D activities regarding cannabis and CBD is expected to strengthen and flourish the cannabis industry in the coming years. Besides the U.S., countries like Germany, Finland, Israel and Canada have also permitted the medical use of marijuana, considering its therapeutic elements. Some research says that certain compounds in cannabis might have anti-cancer properties and hence, researchers are continuing their studies to get into the depth of it. Due to its antibiotic effects, cannabis might be used to treat antibiotic-resistant infections. This is expected to initiate the development of topical CBD antibiotic creams in the future.

      Trends Affecting The Industry

      Use of innovative living materials

      Cannabis brands, these days, are teaming up with celebrities in the entertainment industry and also telling the story of cannabis and its benefits through television shows to normalize it among the mass. Celebrity endorsements have turned out to be a real game-changer in the cannabis marketing space as these help cannabis brands to successfully reach out to a wider crowd. Also, various apps that help users discover cannabis dispensaries and delivery options in states where cannabis is legal, are being constantly developed and launched in the market.

      Use of innovative living materials

      Today, cannabis businesses are acquiring more customers through extensive product innovations. Multiple companies are manufacturing hemp-induced tasty edibles like candies, chocolates, etc., which are gaining considerable popularity. The consumables containing cannabis in lower-dose are getting widely accepted by non-smokers as well. The beverage industry is also preparing to introduce hemp-based drinks in the coming years.

      Use of innovative living materials

      Cannabis brands are currently getting lucrative opportunities to set themselves in the wellness space due to people’s increasing inclination towards health and overall well-being. Cannabis brands are producing various low-dose cannabis-induced edibles and taking initiatives to lift the category out of the stereotypes through various impactful marketing campaigns that make people aware of the medicinal attributes of cannabis and its contribution to wellness when taken in specific forms and quantities.

      Why Does A Cannabis Business Need Financing?

      • To pay the cannabis business license fees, which are quite high, depending on the type of business. 
      • To pay for the grow house, dispensary, equipment, and utilities, which are quite expensive.
      • To hire and maintain staff.  
      • To conduct marketing campaigns or get celebrities on board to promote the products.
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      Merchant Cash Advances(MCAs) for Cannabis Companies

      Definition

      Merchant Cash Advances are advances on future receivables with a flexible and non-stringent repayment structure and a short term of 4 to 12 months. MCA providers give approvals in hours and disburse funds within 24-48 hours of the approval.

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      Application Requirements

      Primarily, the borrower’s personal and company ID proof, business plan, profit-loss, and business account statements of the last 6 months to 1 year. The amount a company can borrow often depends on the state’s medical marijuana and recreational marijuana legalization. However, businesses trading in states where cannabis is illegal might find it hard to get financing.

      Repayment Structure

      An MCA is priced based on a factor rate, which is generally between 1.1 and 1.5, depending on the industry type, average monthly credit card sales, the amount required and the trade history of the company applied for MCA. As repayment of the advance is based on future credit/debit card sales, the repayment amount can go up or down depending on the daily sales. The factor rate, which generally ranges between 1.09 and 1.5, is multiplied by the principal to determine the total payable amount.

      Funding for Cannabis Industry
      SIMPLE PROCESS TO APPLY FOR MERCHANT CASH ADVANCE FOR YOUR CANNABIS BUSINESS

      As we mentioned before, the application process is simple.
      We will break it down for you step-by-step.

      Step 1
      Funding for Cannabis Industry

      The borrower needs to provide the lenders with social security numbers as well as signatures to get the credit pull authorized.

      Step 2
      Funding for Cannabis Industry

      MCA lenders ask for sales volume by card type, return frequency, processing fees, chargeback history, monthly costs, batch frequency, average transaction size, and processor-imposed reserves. The borrower needs to submit all pages of each bank statement, besides the above-mentioned documents.

      Step 3
      Funding for Cannabis Industry

      After submitting the primary documents, the borrower needs to provide certain additional documents like Articles of Incorporation, K-1 of recent business tax return, business property lease, driver’s license or any other photo ID, voided cheques, recent business tax return, and financial statements.

      Step 4
      Funding for Cannabis Industry

      The underwriters then get in touch with the borrower’s vendors, business property landlord, if any, or the bank holding the mortgage on the business property, to understand if the business has permission to continue operating in the same location at least throughout the loan repayment time frame.

      Step 5
      Funding for Cannabis Industry

      The lenders contact the borrowers over calls to review the business information, discuss the use of the advance and assess the borrowers’ willingness to follow through with the contract terms.
      Some MCA providers hire inspection firms to perform a site inspection by visiting the borrowers’ location to verify the address, examine inventory and take note of the number of credit card machines available on site.

      Step 6
      Funding for Cannabis Industry

      Finally, the repayment method is decided on.
      After getting approval on the application, the borrower gets the funds transferred to his/her business account, within 24 to 48 hours.

      Primary Benefits Of MCA

      quick

      MCAs come with simple application processes and offer quick approvals and fund disbursement.

      flexible

      MCAs come with flexible repayment terms.

      strict

      MCAs Do Not restrict the usage of the funds.

      do not ask for collatral

      MCAs do not ask for collateral.

      Other Popular Financing Options for Cannabis Business

      Invoice Factoring

      Technically, it is not a loan, but a financing option where a lender buys a company’s unpaid invoices at a discounted rate. The lender gets the discount for providing a fee and the borrower gets the remainder of the balance. As cannabis businesses often experience cash flow lags because of the long waiting period between raising invoices and receiving payments, invoice factoring turns out to be quite a convenient financing option for cultivators, distributors, manufacturers, cannabis brands, and ancillary companies.

      More info on Merchant Cash Advances (MCA) & Cannabis Business Funding.

      NEED FUNDS TO GROW YOUR CANNABIS BUSINESS ? APPLY FOR MERCHANT CASH ADVANCE TODAY.