United Capital Source has experience in facilitating Small Business Loans for marijuana dispensaries and businesses. We offer a wide range of business funding options. Contact us today for your FREE business funding consultation!
Marijuana is legal in nearly half the states but illegal on a federal level. So, on top of the typical problems faced by every retail-related business, marijuana businesses must clear additional financial hurdles stemming from their products’ legal status.
Many marijuana businesses are unable to open bank accounts and, therefore, deal primarily in cash. This requires high-tech security systems, like 24/7 video surveillance, reinforced doors, and windows. Armored trucks are needed to transport hundreds of thousands of dollars in cash regularly.
Businesses that do have accounts with credit unions pay a massive price. There’s an upfront fee of approximately $10,000 to cover financial audits and background checks. Some credit unions also charge at least $5,000 a month for ongoing due diligence and reporting mandated by FinCEN. And since the Internal Revenue Service (IRS) does not permit deductions for businesses involved with illegal substances, marijuana businesses must pay twice or even three times as much in taxes as a conventional retailer.
With so few lending sources available, a marijuana business could easily make the mistake of financing significant business expenses with a credit card. In certain areas, the only alternative is to risk losing your home with a home equity line of credit.
However, it may be possible to secure funding for your legal marijuana business thanks to alternative lenders. This guide explores the industry’s challenges, the opportunities it presents, and the best financing options available. Specifically, we’ll answer these questions and more:
Banks and credit unions are certainly taking their time warming up to the marijuana industry. Such institutions have been legally permitted to provide small business loans to marijuana businesses since 2014, but more than two years later, less than 40% of marijuana businesses have bank accounts.
That number isn’t expected to grow as long as marijuana remains federally classified in the same category as heroin. The revenue generated by marijuana businesses is technically rooted in an illegal substance. The few institutions that do work with marijuana businesses offer minimal services, like direct deposit and sending tax payments to the state.
Starting and maintaining a marijuana business is incredibly expensive. The cost to purchase warehouse space in Colorado has reportedly doubled over the past two years, and marijuana businesses must pay an extra 10% on federal employee withholding taxes because they can’t pay them electronically. Marijuana businesses also aren’t eligible for the same tax deductions as traditional small businesses, forcing them to double or triple the amount of taxes they would normally pay, reports ThinkProgress.
A viable solution to these funding difficulties lies in alternative business financing, and no, we’re not just talking about investors. Giving up a stake in your marijuana business is much more expensive than, say, securing a working capital loan, especially if your company is poised for a buyout.
Colorado-based vaporizer company Green Smoke, for example, was purchased by Altria Group for $110 million. If Green Smoke had given away 10% of the company, they would have had to pay $11,000,000 at the time of the sale. Another option could have been giving up 10% debt-equity in exchange for $2 million in working capital with 18% interest over the course of two years. This would have cost them just $2,360,000 at the time of the sale.
Sources of business funding are sparse for the marijuana industry. Still, according to Cashnibis, several Colorado marijuana businesses have received millions in working capital loans, real estate loans, and equipment financing. These companies proved good cash flow, had a strong financial history and sought at least $250,000. Regarding working capital loans, terms ranged from 12-24 months, with rates starting from the mid-teens up to more than 20%. Cultivation equipment cannot legally be used as collateral, so a down payment of 35 to 45% is usually required.
Marijuana business loans are available for California businesses as well. San Francisco-based SPARC was previously looking to expand its grow facility from 10,000 to 25,000 square feet. The company was recently able to make this happen by securing a $430,000 three-year lease on equipment.
Another method of alternative business financing that is beginning to gain traction for marijuana businesses is crowdfunding.
Eaze Solutions, a San Francisco maker of technology for marijuana delivery services, utilized crowdfunding to fund part of a $1.5 million expansion. Redwood City’s Loto Labs was able to crowdfund more than $220,000 to fund the production of a new vaporizer. Potential donors are understandably suspicious of up-and-coming marijuana businesses, so many tend to prove legitimacy using graphs and videos that outline their goals.
There are even cannabis-centric crowdfunding platforms like Cannafundr, Potfundr, WeCanna, and CannaDabbaDo for marijuana businesses that may have been rejected from popular sites like Indiegogo and Kickstarter. However, most marijuana businesses that have found success from crowdfunding did so because they were able to secure partnerships with angel investors and venture capitalists looking for a stake in the business.
In addition to federal law, the marijuana industry’s risky reputation is also attributed to the constant changes in regulations, some of which can have detrimental effects on cash flow and make it extremely difficult to repay debt. United Capital Source specializes in facilitating funding for companies that regularly experience inconsistencies in cash flow and has never rejected a potential borrower solely because he or she belonged to a stereotypically “risky” industry. Terms are extremely flexible, allowing business owners to pay off debt without trouble despite the most extreme, seasonal drops in revenue.
Major banks might be afraid of marijuana’s historical reputation, but United Capital Source‘s lender network does not discriminate based on industry stereotypes. We have worked with plenty of industries that are stereotyped as “low-growth” or “risky.”
And unlike banks, our network’s small business loans are incredibly versatile and can therefore be customized to offset the unique cash flow issues of marijuana businesses. We can facilitate working capital loans to cover rising regular expenses or standard business term loans for larger initiatives, like adding warehouse space, meeting security regulations, or ordering excessive inventory long before it will be sold.
Another viable option for revenue-generating investments is revenue based business loans. This working capital loan is designed for businesses with consistently strong revenue, which is an undeniable attribute of this booming industry. Payments are deducted as a fixed percentage of monthly revenue. Your largest payments would theoretically not be made until your products are selling like wildfire.
With this payment system, you could launch a long-term marketing campaign, increase staff, or buy new equipment without having to compromise operational funding to make payments shortly after. Multiple working capital loans have also proven to be very effective when it comes to paying suppliers at the right time to grow their businesses just like yours.
We are well-aware that debt financing might be a completely new experience for a marijuana business. Rest assured: You do not have to worry about being taken advantage of or being restricted from certain business funding programs. We are more than happy to negotiate terms that accommodate your individual financial cycle and walk you through every step of the repayment process. The marijuana industry’s explosive growth is inevitable. But marijuana businesses will only serve their expanding customer base if companies like UCS are willing to take this epic journey with them!
Is your marijuana business ready to expand? Call 855.217.4785 or visit the UCS website to chat with a business funding expert who has solved this dilemma many times before. Potential borrowers are judged exclusively by performance, so if the cash flow is there, you will not miss out on your chance to cash in on the world’s fastest-growing industry! Apply now to see how much you qualify for!
Cannabis Business Loans are business funding products designed to meet the unique needs of the emerging legal market. A cannabis loan could help with acquiring expensive equipment, providing working capital, and commercial real estate acquisition in the restrictive legal marijuana industry.
Starting and maintaining a marijuana business is incredibly expensive. The cost to purchase warehouse space in Colorado has reportedly doubled over the past two years, and marijuana businesses must pay an extra 10% on federal employee withholding taxes because they can’t pay them electronically. Marijuana businesses also aren’t eligible for the same tax deductions as traditional small businesses, forcing them to double or triple the amount of taxes they would typically pay, reports ThinkProgress.
A viable solution to these funding difficulties lies in alternative business financing, and no, we’re not just talking about investors. Giving up a stake in your marijuana business is much more expensive than, say, securing a working capital loan, especially if your company is poised for a buyout.
Thus, Cannabis Business Loans can come in the form of:
Banks and credit unions are certainly taking their time warming up to the marijuana industry. Such institutions have been legally permitted to provide small business loans to marijuana businesses since 2014, but more than a decade later, less than 40% of marijuana businesses have bank accounts. In 2021, only 518 of the nearly 5,000 commercial banks in the US reported servicing the cannabis industry, according to a report from the law firm Connor & Connor.
Potential rule changes on the classification of marijuana could expand access, and the SAFER Banking Act would provide a safe harbor for banks that could.
However, the law is still in limbo, and the revenue generated by marijuana businesses is technically rooted in an illegal substance. The few institutions that do work with marijuana businesses offer minimal services, like direct deposit and sending tax payments to the state.
Recreational marijuana is now legal in 24 states, with 79% of Americans living in a county with at least one legal dispensary, per FlowHub.
Cannabis revenue is expected to reach $50 billion by 2025, according to Investopedia.
In 2024, the US cannabis market was valued at approximately $38.5 billion, with projections indicating a compound annual growth rate (CAGR) of 11.5% between 2025 and 2030, according to Grand View Research.
Major banks might be afraid of marijuana’s historical reputation, but United Capital Source‘s lender network does not discriminate based on industry stereotypes. We have worked with numerous industries that are often stereotyped as “low-growth” or “risky.”
And unlike banks, our network’s small business loans are incredibly versatile and can therefore be customized to offset the unique cash flow issues of marijuana businesses. We can facilitate working capital loans to cover rising regular expenses or standard business term loans for larger initiatives, such as adding warehouse space, meeting security regulations, or ordering excess inventory well in advance of its sale.
Another viable option for revenue-generating investments is revenue based business loans. This working capital loan is designed for businesses with consistently strong revenue, a notable attribute of this booming industry. Payments are deducted as a fixed percentage of monthly revenue. Your largest payments would theoretically not be made until your products are selling like wildfire.
With this payment system, you can launch a long-term marketing campaign, hire new staff, or purchase new equipment without compromising operational funding to make payments shortly afterward. Multiple working capital loans have also proven to be very effective in paying suppliers at the right time, helping businesses like yours grow.
| LOAN TYPES | MAX AMOUNTS | RATES | SPEED |
|---|---|---|---|
| Merchant Cash Advances | $7.5k – $1m | Starting at 1-6% p/mo | 1-2 business days |
| SBA Loan | $50k-$10m | Starting at Prime + 2.75% | 8-12 weeks |
| Business Term Loan | $10k to $5m | Starting at 1-4% p/mo | 1-3 business days |
| Business Line of Credit | $1k to $250k | Starting at 1% p/mo | 1-3 business days |
| Receivables/Invoice Financing | $10k-$10m | Starting at 1% p/mo | 1-2 weeks |
| Equipment Financing | Up to $5m per piece | Starting at 3.5% (SBA) | 3-10+ business days |
| Revenue Based Business Loans | $10K – $5m | Starting at 1-6% p/mo | 1-2 business days |
Accessing capital through cannabis business loans can offer several advantages that support the growth and stability of your dispensary or related enterprise, especially in a rapidly evolving industry. Here are some of the most notable benefits:
Traditional lenders are often unwilling to work with cannabis businesses due to federal restrictions. However, alternative financing companies like United Capital Source offer funding programs specifically designed for the unique needs and regulatory challenges of dispensaries, cultivators, and other marijuana-related operations.
Cannabis business loans from alternative lenders typically have quicker approval and funding times than those from traditional banks. Whether you need to purchase inventory, upgrade equipment, or cover licensing fees, you can secure the funds you need—often in as little as 24 to 72 hours.
You can use cannabis business financing for nearly any operational need. This includes purchasing compliant packaging, improving security systems, expanding retail space, or simply managing cash flow gaps during slower sales cycles.
Many cannabis business loans are structured as debt-based financing, meaning you won’t have to give up equity in your business. This allows you to maintain full ownership while still fueling growth and managing expenses.
Depending on the type of loan and your business’s revenue model, repayment terms can be customized to match your cash flow. For example, some lenders offer daily or weekly repayment plans that work well for businesses with consistent income.
Because cannabis businesses are often excluded from mainstream financial systems, accessing alternative loans and repaying them on time can help build your business credit profile. This is crucial for improving your chances of securing larger financing options in the future.
While cannabis business loans provide essential funding for marijuana dispensaries and related operations, there are a few potential drawbacks to consider before applying:
Due to federal restrictions on marijuana, most banks and credit unions do not offer financing to cannabis-related businesses. This limits your funding options to alternative or private lenders, which may come with higher rates or stricter repayment terms.
Since cannabis is still federally illegal, lenders who serve the industry often charge higher interest rates to offset the perceived risk. As a result, the cost of capital for cannabis business loans may be higher than that for traditional financing options in other industries.
Many cannabis financing solutions are short-term in nature. This means your business may need to repay the loan faster than a typical small business loan, which can place added pressure on cash flow if not managed carefully.
Even after receiving funding, cannabis businesses must comply with strict local and state regulations regarding operations, reporting, and taxation. Lenders may require extensive documentation and proof of compliance throughout the loan term.
While many cannabis business loans are flexible, some lenders may place restrictions on how the funds can be used, particularly for activities that carry heightened legal or compliance risks. It’s essential to understand all stipulations tied to your financing agreement.
Although some lenders are more lenient with credit requirements, many cannabis businesses still face challenges in qualifying for financing, especially startups with a limited operating history or those lacking strong financial documentation.
The amount of paperwork required depends on the product you choose. Funds can be approved and distributed for most products within 1-3 business days. Here’s how to apply
The first step is choosing the most sensible solution to the problem at hand. This should require some research, as each product is designed for different types of expenses and cash flow cycles. Are you looking to cover a short-term or long-term expense? Is demand expected to increase or decrease in the coming months?
Considering the funds’ purpose will also help us determine the correct borrowing and terms for your needs.
Here are the documents and information required for Cannabis Business Loans:
You can begin the application process by calling us or filling out our one-page online application. Either way, you’ll be asked to enter the information from the previous section along with your desired funding amount.
Once you apply, a representative will contact you to explain the repayment structure, rates, and terms of your available options. This way, you won’t have to worry about any surprises or hidden fees during repayment.
If you’re approved, you’ll hear back from us within 24 hours. After closing, funds for most business financing products should appear in your bank account from 24 hours to one week.
Your business loan isn’t just a way to get financing for your business. It’s also an excellent opportunity to start building (or improving) your credit.
Regardless of the type of business loan you get, make all your required payments on time and in full. If you get a business credit line or another form of revolving credit, keep your balance below the credit limit.
Consistently making your business financing payments on time and in full will have a positive impact on your credit. And that means preferred rates and terms when you next need business financing.
If your application is declined, it’s possible that you applied for the wrong product to meet your cash flow needs. We would likely recommend a different product with a less hazardous repayment structure in this case.
Your application might also be declined if it is determined that you cannot afford to take on more debt at this time.
If your credit score is holding you back from accessing financing, consider working with a reputable credit repair service to raise your scores.
Cannabis financing includes loans specifically intended for cannabis, CBD, and hemp-related business purposes. Cannabis businesses can utilize funding to cover expenses such as inventory, equipment, hiring new employees, and overhead.
A cannabis term loan provides a lump sum of capital that is repaid over a specified period through regular payments. Cannabis equipment financing is essential for businesses to acquire the new tools necessary for operations.
Cannabis property loans are designed to fund cultivation warehouses, manufacturing facilities, and retail dispensaries. Cannabis real estate loans can range from $100K to $20M.
The cannabis industry faces significant regulatory barriers that impact access to traditional financing options for real estate. The cannabis real estate sector requires lenders to understand specific industry risks associated with cannabis financing.
The cannabis financing market is driven by the growth of the cannabis industry and the need for working capital solutions. Most cannabis businesses must rely on alternative financing solutions to access the capital they need. The cannabis financing underwriting process may involve specific fees not typically associated with standard business loans. Qualification for cannabis loans normally requires a strong personal credit rating and a satisfactory credit history.
Alternative financing solutions for cannabis companies include private loans and vendor financing. Private loans offer cannabis businesses a source of funding that bypasses the regulatory hurdles associated with traditional financing options. Hard money lenders provide short-term financing that requires borrowers to use real estate or another form of collateral. These loans may have higher interest rates than licensed operators are willing to pay.
Traditional banks are the most used source of financing for personal and business purposes. Traditional bank financing typically offers more flexible term lengths compared to other lending options. However, most banks won’t lend to businesses in the cannabis industry. Regulatory restrictions prevent many banks from providing financing to cannabis businesses.
Cannabis businesses are ineligible for favorable loans from the Small Business Administration due to federal prohibition. Many lenders limit their services to ancillary businesses instead of direct cannabis businesses due to legal risks.
Loans backed by the US Small Business Administration offer better rates and more lenient requirements than many other sources of business financing. Loans from the US Department of Agriculture are guaranteed by the federal government and available through traditional lenders.
Cannabis dispensaries are regulated establishments selling cannabis and cannabis-related products. However, many businesses support dispensaries and the products they offer.
Cultivation Businesses: Cannabis cultivators produce cannabis plants and components like CBD for medicinal and recreational purposes.
Processing Businesses: Cannabis processors transform raw cannabis materials into products like edibles, oils, and tinctures. Processors must meet strict regulatory standards to ensure safety and quality.
Quality Control Businesses: Cannabis quality control labs analyze product samples for potency and contaminants. Laboratories play a critical role in consumer trust and cultivators’ informed decision-making.
Distribution: Cannabis distributors handle the distribution process, ensuring cannabis goods reach retailers. Distributors offer additional services, including inventory management and product tracking.
Packaging Businesses: Cannabis packaging companies offer solutions for both recreational and medicinal products. Packaging companies ensure compliance with health and safety regulations.
Equipment Manufacturers: Cannabis equipment providers produce and maintain specialized equipment for the industry. Equipment providers help cannabis producers meet safety standards and quality control.
Technology Services: Cannabis technology and SaaS companies design solutions for inventory management and compliance tracking. Tech solutions help maximize efficiency and profitability while maintaining compliance with regulations.
The rise of adult-use cannabis has led to increasing demand for cannabis business financing, yet traditional financial institutions remain hesitant to lend. This ongoing gap in securing financing creates obstacles for cannabis business owners seeking to expand their purchasing power. Without access to traditional loans, many entrepreneurs turn to private investors, cannabis lending networks, and flexible financing solutions tailored for the sector.
For instance, hemp-focused service companies supporting the hemp business must often submit a well-prepared business plan with every loan request. These companies—ranging from equipment vendors to legal compliance consultants—can tap into cannabis-specific funding options, such as short-term working capital loans or cash-out refinances on existing real estate holdings.
While equity financing remains an option, it is not always ideal for businesses that want to maintain control. Outside investors provide capital in exchange for a stake in the company’s equity ownership. Venture capital firms typically focus on providing funding to startups and emerging companies that demonstrate promise for significant growth. Many operators in recreational cannabis markets find it more advantageous to pursue marijuana business loans that preserve ownership while fueling business growth.
By leveraging strategic lending partners that understand the nuances of the cannabis industry, these businesses can get access to the capital they need without sacrificing equity or compliance. Cannabis business owners should also consider other factors, such as meeting requirements and protecting their assets through insurance or legal structuring, when pursuing financing.
Yes, you can get a cannabis business loan with bad credit. At United Capital Source, borrowers with bad credit can access the following products to acquire the necessary capital for their marijuana dispensaries:
Most of these products carry shorter terms and are relatively easy to repay. When you have bad credit, you’ll receive shorter terms and higher rates to reduce default risk. However, if you have excellent cash flow or can provide collateral, you may be able to access higher borrowing amounts and competitive rates, even with a poor credit history. For example, the borrowing amount for a Merchant Cash Advance is based on your debit and credit card sales volume. If many of your sales come from these payment methods, you may be able to access up to 150% of your monthly debit and credit card sales.
Fraud Disclosure:
Please be aware that individuals have been fraudulently misrepresenting to business owners (and others) that United Capital Source, Inc. (“UCS”) can assist small businesses in receiving government grants and other forgivable business loans, when in fact those grants or loans do not exist or are not available. These individuals have ulterior motives and are engaging in the unauthorized use of the names, trademarks, domain names, and logos of UCS in an attempt to commit fraud upon unsuspecting small business owners.
UCS will never communicate with a prospective client on Facebook, Facebook Messenger, or any other type of social media. Further, any email communications will always come from an official UCS email address and not a Gmail, Yahoo, or other email domain. If you believe you have been contacted by someone posing as an employee of UCS, please email [email protected].
