Financing in the Cannabis Market
This DailyBlunt pairs well with: Money Talks by AC/DC
And, we don't mean the strain ACDC... though that probably works well too since it's a nice sativa-dominant hybrid with high CBD (1:20) that does wonders for treating pain.
Today we’re looking at financing in the cannabis market.
What have you heard?
Recently we’ve been getting some inquiries from multiple cannabis business owners who are in varying stages of growth. You know, guys who need more equipment, have to hire staff, desperately need to figure out a better sales team, etc. Even if you grow the best stuff on the planet, none of that matters if you can't get it sold in a store.
We also have some late comers to the marketplace looking to who are looking to get started. Those guys tend to need investment capital for everything. Many buyers today are looking for seller financing or try to figure their way into a business without bringing any money to the table. I'm sure you're shocked, right?
No matter who you are, in today's market there is a continual flow of people looking to borrow money AND also people looking to lend money.... but at a cost... of course.
Give me the quick version.
There is always a give and take, right?
If you want someone else to foot the bill, then you'll pay for it. If you're willing to bring your own hard work and cash to the table, you'll probably see a better bottom line, but that means you are out the cash. As with any business, there is a balance between the cash required to launch and then the capital it takes for operations (and more operations, and more operations).
Take the normal "start-up" problems that come with being under-capitalized, and combine that with an industry that is still illegal on the federal level, and what do you get?
Vultures. Whoops. I mean.... Opportunity.
What do vultures charge?
It's important to realize that there are rules and regulations that banks have to adhere to on a federal level, or else risk serious punishment and fines or being shut down or seized by the government.
And then, there are private lenders who get to make up their own rules.
Remember how cannabis is federally illegal? Because of that fact, you have to play with the guys who get to make up their own rules. And that's too bad, because it's costing you.
Side note: You can argue it's legal in the state until you are blue in the face, but in a lot of ways that impact your business directly... none of that matters. Get on board, and fight for national legalization with us AND keep your business in check locally so you don't risk the entire operation and industry for everyone. Ok, I'll get off my soap box now. Thank you.
As a result of new imaginary "standards", we see most interest rates on cannabis companies and cannabis real estate deals between 8-14%. We had one guy who by the time you factored in all the fees and limited terms, turned into an effective interest rate of 30%+. We couldn't recommend to that client that 30% was a good deal, but I promise there are dozens of you in the market who are paying those rates, which is why they exist. If no one paid the high rates, then the rates would adjust. That's economics 101: supply and demand.
What's the answer?
The only advice we have for this issue, is keep your eyes open. There are many options when you need funds. You can sell equity in the company. You can borrow money on terms. You can leverage other real estate or investments. We will talk about pros and cons with all of these scenarios and more over the coming weeks.
No matter what you think you are looking for, you also need to keep an eye on what the market is doing. Should you buy? Should you sell? Should you borrow? We help you stay on that too with our weekly CannaPremium newsletter. If you're not a premium subscriber yet, then you should be. See the code below to keep some extra cash money in your pocket at sign-up.
The bottom line.
Whether you are looking to borrow money, find a partner, or even lend money. We have an answer that gets you in front of the crowd you need. That's our job.
We match people with what they want. But, we don't charge 30%. Heck, we don't even charge a commission. It's $649 one-time to set-up your file and $149/month to oversee it for you. That's it. No hidden anything. And, cancel once you are done.
We recommend that everyone come to the table with openness to new deals that they maybe haven’t imagined yet – you never know, it just might work out better than you thought!
Need help? Give us a call at (206) 466-4020 or firstname.lastname@example.org. We can get you set-up in our system so you can start making the right connections.