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Financing Options for Starting a Weed Business – Cannabis Hemp Blog


Despite all these difficulties, many owners have found workarounds. Still, there is a lot of perplexity about the financing of cannabis companies.

If you are considering starting a cannabis business, go ahead, you have many better options than hiding money under your mattress. It’s about understanding the legal framework you’re working in and finding companies that have sprung up to solve their own financial problems.

Funding Options for Cannabis Businesses

Just like other types of businesses, you have many funding options for your weed or cannabis business. Your options include debt financing and equity financing. Most of the options come from alternative lenders, venture capital firms specializing in cannabis investments, and niche companies that have created platforms to address issues specific to the cannabis industry.

Legal Challenges in Funding Cannabis Businesses

The main problem with funding a cannabis business is the complexity of the legal system.

As a reminder, in the United States, marijuana is illegal at the federal level. Yet it is legally approved for recreational use in many states and Washington, DC, and decriminalized in many others. This decriminalization trend means the market is ideal for those looking to start cannabis businesses. However, challenges remain because the federal government has not given the green light to the weed trade.

Obstacles to Cannabis Business Funding

Banks generally do not provide loans to cannabis companies, especially those directly involved in the plant or its derivatives. It has to do with the Federal Deposit Insurance Corporation (FDIC). As a general rule, the FDIC will not insure a bank that assumes “existential” risks, including lending to businesses in violation of federal law. Additionally, some banks are willing to consider financing options that invest in cannabis-related businesses that avoid legal risk.

Financing cannabis businesses ahead of the legalization of recreational marijuana is a concern for banks. The banks themselves would avoid criminal liability for aiding and abetting activities still considered violations under federal law. Knowingly accepting deposits from a cannabis business can be considered money laundering, although this has generally not been enforced. The Department of Justice tolerates cannabis businesses in states where it is legal, but this is likely to change with the political situation unless the government legalizes marijuana federally.

Most banks fall under the federal government. Since the government considers transactions related to the cannabis trade to be a criminal activity, federally chartered banks cannot handle the money of cannabis businesses.

Arguments that the money is for personal use would not hold. Indeed, technically and legally, the bank is subject to money laundering laws. If a bank is accused of money laundering, it will face heavy penalties.

The legal aspects related to money laundering are complex. This means that your local bank branch will not open an account for you if you are in the cannabis business. You would also not be able to take out loans, credit cards or any other financial products through these institutions.

Tips for Overcoming Obstacles

If you are interested in the cannabis business, you have to find a loophole in the legal complexities. A regulatory advocate who is an expert in emerging regulatory issues, including those related to cannabis, says:

The key to high-risk areas and banking relationships is to have a strong compliance and transparency program. Independent compliance audits of the company, either by a third party or by someone who is not actively involved in your compliance management system, will reinforce the trust that the bank has with the company.

Alternative Funding Options for Pot Business Funding

Alternatives are not always ideal as they tend to be less stable than banks. But because these platforms aren’t federally regulated or FDIC-insured, they aren’t bound to follow the same laws as banks. The financing option that is best for you depends mainly on the growth phase you are in.

Crowdfunding

Crowdfunding is a popular option for startups. Crowdfunding is the use of limited amounts of capital from a huge number of people to support another business.

It uses huge systems of individuals through internet-based life and crowdfunding sites to unite speculators and business visionaries, and can eventually build a business by expanding the pool of financial specialists from which assets can be lifted beyond the usual hover of owners, family members and investors.

The best part about crowdfunding is that the organizations accept the money as a propelled reservation of the item. This implies that fundraisers get their items when the organization completes the creation. On the off chance that the organization does not achieve its objective, the stage will return all the money to all the breeders of the store through a computerized framework.

Some crowdfunding sites, including Indiegogo, Kickstarter, Fundable, and Patreon.

There are a few marijuana-specific platforms, including juicy fields (Germany), CannaFundr and Fundanna.

What makes Crowdfunding an increasingly attractive approach to obtaining assets rather than speculation or subsidizing value is the reason that large numbers of people will effortlessly give to pre-book items. that the startup produces.

Debt financing

Debit or credit card financing is a trickier method of equity financing, but alternative lenders and other financial platforms have made it possible for the cannabis industry to secure financing.

  • ONLINE LENDERS: Since traditional financial institutions are unwilling to work with the cannabis business, many online lenders are open to funding them. Online lenders offer short-term options such as working capital or lines of credit with a quick turnaround. But keep in mind that not all online lenders are willing to partner with the industry, so shop around and ask the experts. Moreover, these lenders do not give credit cards.
  • FLOW SYSTEM: you would not be able to use a credit card for your cannabis business. But there is a unique debit system available through can pay, which allows businesses to accept payments from customers who also use the platform. Can pay is separated from the banking system so that transactions can be made through it, but the safety of money is not guaranteed. Still, it’s safer than carrying cash.
  • POINT OF SALE SYSTEMS: One option is Green Bits, which helps you manage all dimensions of sales processes. This platform includes combining and integrating state laws so you can be sure you stay compliant, integration with other apps, and capabilities that help you easily manage your customers.

LeafLogix can help growers, distributors and processors manage their day-to-day finances. Whatever part of the supply chain you manage, LeafLogix likely has the capabilities to help you manage and track your day-to-day operations.

Equity financing

As the cannabis industry emerges, equity financing is used frequently these days. There are many options for equity financing.

  • CAPITAL RISK: If you are past seed funding, you can give it a try. These include Snoop Dogg’s Casa Verde Capital.
  • PROVIDENTIAL INVESTORS: You can easily find an Angular investor by searching a list of Angles interested in investing in the cannabis sector. Cannabis industry meetups and conventions also exist, just attend some of them and see who contacts you.



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