Everything you need to know about cannabis loans.

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You might be considering starting your own cannabis business, you probably have seen profitable it can be if ran correctly. Cannabis is one of the most profiting business’s out there right now and it is only going to get more profitable as more states start legalizing marijuana. But starting a cannabis business is not all that easy and could require a good amount of paperwork. The reason why is that the government is still very strict when it comes to cannabis. After all, they only legalized it a few years ago, and some states still have it illegal to this day. 

We’re going to look at what you need in order to get a cannabis business loan for the state of California. We recommend that you check with your local state laws as to some laws are different between states. 

What is involved

When applying for a cannabis business loan you want to make sure that you have all of your documents. To make it easier banks are going to want to see a healthy credit pattern and score. Here’s so of the documents that you need to apply for a cannabis business loan. 

  • Credit Score- Your lender is going to want to see that you have a healthy credit score, You check your credit report by accessing it through one of the major credit bureaus, or you bank can run one for you.. It is better that you check first so that you do not have an unnecessary inquiry on there. Banks and lenders usually feel comfortable above the 700 points of your credit score. You might need to work on your credit score a little bit before applying for a loan. Make sure that you pay all your bills on time and that you do not go over 30% of any credit card limits that you may have. 
  • Bank Statements- Your lender is going to want to see how much money is coming in. That’s going to play a big part in their decision making of you getting approved for the loan or not. Yes, a good credit score is important but so is actually money. If you do not have a lot of money coming in or a lot of assets banks and lenders might not feel comfortable lending to you. It is best to have at least 6 months of bank statements with you. Bring statements from all your accounts and any stock market accounts that you might have. Again the more money you have the better your chances of getting approved.
  • Background report- A background check is going to most likely be required when applying for a cannabis business loan. As some federal requirements prevent certain people with criminal records from holding a cannabis license. It is best to check with a business lawyer about what is a disqualifying event. Nonetheless, a background check should be brought with you when applying for the loan. 
  • Licenses- You are going to need to have licenses for cannabis operation prior to applying for your loan. The appropriate licenses basically tell the lender that you have been approved by the federal government to sell cannabis products. The licenses vary from what kind of sales you are looking to do. Make sure that you have get a license in each area that you are looking to take part in. The 5 areas are 
  1. Manufacturing covers extraction, infusion, packaging. 
  2. Dispensaries- Which are the stores that you sell your cannabis products 
  3. Cultivation- This is going to be production of cannabis flower and biomass 
  4. Testing- Which is going to cover quality-control services.
  5. Distribution- Which is going to be supply chain management.
    Make sure that you have your license in each of these areas that you want to participate in. Warning not having the right licenses could cause you to get shut down and lose a lot of money. We highly recommend that you hire a business lawyer to help you with these processes. 

 

The most important process of this all is going to be the fact that you have a business plan. You need to make sure that you know what you are getting yourself into. Make sure that you are preparing for a long time of responsibilities. As your business is only as good as you take care of it. 

Your business plan should include 

  • Create a master plan- Your going to want to do this before anything. Putting together the master plan of how your business will run and operate. 
  • Prepare site- If you are planning to open a dispensary or need a distribution site. It is best to start looking for sites so you can get an idea of how much you need and the cost of securing the site.
  • Get approvals from the state- This is where and when you will start applying for the correct licenses from your local state.

 

We hope this has helped you and we wish you much success in your business ventures.

George is the CEO of Expat Group Limited, based in Hong Kong.

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