Cannabis Business Loans

Experience in underwriting cannabis loans make all the difference in the speed and success rate of industry loans.

Cannabis business loans are a different animal than most credit facilities, and there is no substitute for experience in navigating these credit facilities. The regulatory environment and the relative youth of the industry has continued to limit traditional funding sources available to other industries. Although some banks are beginning to underwrite a limited number of loans in a few states, those loans rarely begin to meet the practical demand or speed of funding needed in the fast-paced cannabis industry. It would be fair to say that bank lending in the cannabis industry, as of mid 2021, is practically negligible.

Cannabis loans are definitely available, and executed regularly. Cannabis funding for grow operations, extraction equipment, lab testing equipment, real estate, and construction are continuing to see increased demand as more states expand the ability to sell more medical and recreational products. Despite a swath of deregulation, cannabusiness funding is largely limited to private equity funds that serve the industry with specialized underwriting criteria at a price tag that is commensurate with the profit margins that can be realized by savvy operators in the space.

Cannabis business loan types include real estate acquisition loans, real estate refinancing, leases on equipment, leasebacks, dispensary lines of credit, acquisitions, and accounts receivable factoring. Although MJ inventory may not be used as collateral, other assets on the balance sheet can be used to collateralize a loan to strengthen the chance of closing success. Often, entrepreneurs in the cannabis industry maintain other, profitable, profitable operations that can be used to cross collateralize the loan to show they can service the debt in a startup scenario.

As in most cases, time is money, and in the cannabis industry, time to establish your foothold in the market is critical. The time it takes to close your loan can also be critical. Using private funds, speed can be obtained at a price, whereas with bank underwriting, a loan can take 6 months or more to close. When faced with a time sensitive scenario, it’s important to work with a cannabis financial consultant who can lay out a strategy to meet short term goals and refinance out of high cost credit facilities when possible after critical time-sensitive objectives are met.

Having reviewed thousands of credit scenarios in the cannabis industry here at HEF, we’ve been able to close multimillion-dollar loans in a matter of days because of our internal underwriting infrastructure and relationship with our partners. Our goal is to help our clients achieve their sometimes time sensitive business objectives and then provide triggers to convert high cost debt into lower cost debt. Specialization and experience move credit facilities quickly down the path to closing, and help to avoid pitfalls that are unfortunately abundant in this sometimes-treacherous business environment. HEF is not the only firm that operates with a high level of integrity, but it’s important to identify red flags when seeking a funding consultant.

We believe in talking to our clients, not having them fill out extensive applications and force them to provide financials prior to having an engaging conversation about realistic expectations about rate and term. That’s because we underwrite directly to cannabis business funds every day. Let us save you time by running through your specific scenario and in 15 minutes we’ll give you a realistic range of rate and term without the hassle of being bombarded with document requests. Contact us when it’s convenient for you, and get an experienced, realistic perspective that will save you time and potential headaches.