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Get a Dispensary Business Loan: A Complete How-to Guide


The lending industry has always made it tough to get a dispensary business loan. There just aren’t enough banks that will work with cannabis businesses, leaving the best option being private lenders. However, these funding companies usually charge higher interest rates and require more collateral before granting credit.

Yet, this isn’t entirely due to federal law. Rather basic supply and demand! If you compare the number of grocery stores to the number of dispensaries, there would be a drastic difference. That explains why private lending can charge such outrageous interest rates.

That does not mean it is entirely impossible to get a dispensary business loan. You just have to know where and how to find good ones.

In this blog post, we’ll address all the concerns you might have as a dispensary trying to secure a loan, what options you have, and how to improve your chances of approval.

Let’s roll into it.

Dispensaries can use banks

As long as your dispensary complies with the 2014 FinCEN guidance, banking is absolutely possible. Banks are wary of partnering with cannabis businesses because it is a highly regulated industry with an extensive compliance burden. The federal vs. state legalization doesn’t matter as much when considering how banks feel about putting their own portfolios at risk. Therefore, private lending is a much more attainable option when it comes to getting approved for a cannabis business loan.

Avoid predatory lending

The best way to avoid being taken advantage of by a lender? Read the fine print! Make sure you know what they are offering and how it will benefit your company before signing on any dotted lines. It may seem like common sense, but we all too often don’t read these types of agreements carefully enough or ask questions about them. Only attain loans from reputable sources that provide fair terms in order for your dispensary to succeed.

Getting a first-time business loan is not as easy as many think

The lack of an established track record makes it difficult for new businesses to secure financing. But there are ways around this problem. If your dispensary is a new start-up, be sure to highlight your experience in other markets and show that you are a viable long-term prospect rather than just another flash in the pan with little chance of success. Mentioning how well your company has done over time can help when applying for a loan or line of credit.

Various loan options your dispensary can choose from

It’s important as a dispensary to know what options you have before you choose the right business loan. That could be the entire difference between setting your business up for success or digging yourself into a hole.

Inventory financing

Inventory financing has been a popular way for cannabis dispensaries to purchase products they will eventually sell. This short-term loan or revolving line of credit is collateralized by the inventory it’s meant to purchase.

Use this type of loan if your dispensary:

  • Has to pay suppliers for a stock of on-demand inventory that will be warehoused.
  • Is a relatively new company.
  • Needs to pay off debts.

Working capital line of credit

Like credit cards, lines of credit are convenient because you only pay back the amount that was actually used. You can borrow money up to your limit. That is, as long as you pay it back in time with interest rates set by lenders based on their risk assessment.

Use this type of loan if your dispensary:

  • Is only looking to cover operating costs such as inventory, payroll, and rent.
  • Is only looking to draw from the line of credit as needed.
  • Has consistent cash flow gaps due or a slow to busy season cycle.
  • Is able to pay back what is used from the credit line plus interest in a timely manner.

Term loan

Dispensaries who are borrowers of term business loans will often pay an upfront down payment to reduce the total cost and agree on specific repayment terms. A term loan is one such type that allows repayments within a certain time frame.

Use this type of loan if your dispensary:

  • Is rather established.
  • Is looking to upgrade various aspects of your store (security system, software, expansions, etc.).
  • Has the ability to make a downpayment on the term loan.

Merchant cash advance

Merchant cash advances are a popular alternative to traditional bank loans for small businesses. Your dispensary would receive an upfront lump sum of funds, which you will repay with a percentage of sales driven by this agreement.

Just be aware that these expensive deals may conflict with operations. Some lenders include liens against your license when working in cannabis-based industries! Be wary before taking such risks. There’s no telling what could happen if you don’t perform research first.

Use this type of loan if your dispensary:

  • Doesn’t have strong credit or collateral.
  • Is a smaller company.
  • Need a lump sum of money upfront.

Improve your approval odds

The cannabis industry is dramatically different than how it used to be. Therefore, it is absolutely necessary for you to be clear and concise when describing what your company wants and needs. Be able to discuss the specific loan you desire (if you know), and be willing to negotiate interest rates.

As you are applying for a loan, you must be ready to provide:

  • Analytic data regarding sales history
  • Revenue trend expectation
  • Assets of your own
  • Bank statements

All in all

The elusiveness of getting a business loan for your cannabis dispensary has always been an issue. With so few banks willing to work with these types of businesses, the best option is still private lenders who will charge higher interest rates but offer more secure financing than most other sources out there today. Knowing your options, knowing what kind of loan you want, and performing the right research about private lending is key to making the process as easy as possible for you to get a dispensary business loan.

Any further questions? Need any tips?

Shoot us a message here at WeedBoost if you have any questions about how to get a dispensary business loan, if you’re looking to build a website, integrate SEO (search engine optimization), need social media management, or simply want someone to talk to about this whole “cannabis thing”. We got your back.

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