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Can You Start a Cannabis Business With no Money?
Starting a cannabis business can be very expensive, but not impossible.
One of the biggest challenges of starting a cannabis business is scraping together the cash required to get up-and-running. You’ll need to find money to cover the application and licensing fees, rent or mortgage, site build-out, an initial product or equipment order, and so much more. In short, starting a cannabis business can cost millions.
So how are so many people doing it?
Chances are, the folks that just opened a dispensary down your street weren’t millionaires when they decided they wanted to start a cannabis business… So you don’t need to be either.
There’s a wide variety of different ways you can come up with the capital required to get a license and start a cannabis business, like getting a business loan.
Getting a Cannabis Business Loan
Getting cannabis business loans from a standard bank isn’t currently an option since cannabis is still federally illegal. Instead, cannabis startup owners often turn to private lenders with interest or experience in the cannabis industry. A private lender will typically make money by charging interest on the monthly loan payments you’ll be required to pay. Private lenders will typically collect between 15% and 20% interest on your loan, which is relatively high compared to a bank loan that’s usually fixed somewhere between 6% and 12%. With this in mind, research is a very important part of finding the right lender, since interest rates and terms will vary between each one.
Since banks don’t offer loans to cannabis businesses, private lenders have become very popular in the cannabis industry. Although private lenders charge higher interest rates, they offer several benefits. They can provide funds faster and are usually open to more flexible payment terms. Additionally, many private lenders specialize in the cannabis industry and understand the specific needs of cannabis business owners.
One of the best ways to find lenders is connecting with other business owners in the industry who have worked with a lender in the past. This will help you find a high-quality lender that you can trust. Alternatively, you can find lenders, online through simple google searches and on social media platforms like linkedin. It’s a good idea to have a lawyer or financial advisor review any contracts or agreements before signing.
Similarly, aspiring cannabis business owners should also consider working with venture capital firms and investors seeking equity in their business.
Working With Cannabis Investors
Utilizing investors and venture capital (VC) firms is one of the best ways to secure cannabis business funding. Both investors and VC firms provide capital and/or assets in exchange for an agreed upon percentage of equity, or an ownership stake in your cannabis startup. This is lucrative for investors and VC firms because they can profit off of potential dividends or a cash payout down the line if you decide to purchase back their equity.
This is a great option for people at any point on the road from applicant to business owner, but it will require effort to find an investor/firm that’s right for you. Before you begin searching, it’s a good idea to ensure you have a strong business plan, a pitch deck, and realistic financial projections. While coming up with materials to present to investors, avoid over-inflating things like your potential revenue, and try not to make any unrealistic promises. This will lower the possibility of problems down the road.
Finding the right investor can be tricky. Spending time at cannabis industry networking events is a great way to build connections and interest in your cannabis business. You should also stay active online and research venture capital firms that have or currently invest in cannabis businesses.
Alternatively, reach out to a cannabis consulting firm like CannDelta. We have a wide range of industry connections and interested investors looking for the perfect investment opportunity. Your cannabis business funding could be one call away.
Applying for Grants
Many different state and municipal regulatory bodies and local governments offer grants for eligible small business cannabis entrepreneurs who are serious about starting a cannabis business.
Grants are a great way to kickstart your cannabis business, without the stress of paying back cannabis business loans or finding a suitable investment deal. However, getting a grant can be difficult and competitive. There are often social-equity and eligibility requirements involved, such as a maximum net worth.
If you can be considered a BIPOC, women owned, or any other minority owned business, check for grants! Having a minority owned business opens up grant opportunities that could be sufficient for starting your business.
Although grants provide a risk free road to cannabis business funding, they are often difficult to get due to high competition. Many people apply for multiple grants but don’t manage to get one, which can be discouraging. Because of this, it is best not to rely solely on grants to fund your business start-up, and to focus on quality over quantity. In other words, it’s a good idea to put as much effort as possible into some grants you undeniably qualify for, rather than to spend a lot of time applying for more, less achievable grants.
Business Partners
Working with friends, family members, or other business partners who you trust is another great way to source cannabis startup funding. Pooling money together can lessen the financial burden of starting a cannabis business, and make the project feel more achievable. However, you’ll need to keep in mind the challenges that can stem from working with other business partners, especially those who are close friends or family. Be sure to work with people who you trust, and you are confident will be able to deliver on promises.
If you are less keen on having friends or family members involved in your business, there could still be opportunities to find funding from your inner circle by responsibly borrowing money. Be sure to create a loan contract to hold both parties accountable and avoid personal conflict.
Working With CannDelta to Find Funding
CannDelta’s cannabis business consultants can help you find cannabis startup funding by pairing you with investors, license holders, property owners, and fully operational businesses looking to sell equity or completely divest. Our years of industry experience and large network of connections can lead you to a secure and desirable deal. We currently have a variety of licenses and facilities for sale and numerous potential buyers and investors waiting for the right opportunity.
Reach out to CannDelta today to learn more about investment opportunities!
Frequently Asked Questions
How Do I Start a Dispensary With no Money?
To start a cannabis business with no money, you will need to find a way to get funding by getting a bank loan, working with private lenders, investors, or venture capital firms. Alternatively, you can apply for a grant, find a reliable partner who can provide cannabis startup funding, or find another method to generate the cash required for a cannabis startup.
How Profitable is the Cannabis Market?
The worldwide cannabis market is very profitable and only increasing in value with each passing year. According to Statista, revenue is expected to show an annual growth rate (CAGR 2024-2029) of 3.01%, resulting in a market volume of US$75.09bn by 2029. In the US, the cannabis market is expected to grow to nearly 43 billion in 2024.
How do I Start a Cannabis Business?
You can start a cannabis business by applying for a cannabis license in a state that has a recreational or medical cannabis license. The licenses available and potential application windows can influence when and how difficult it could be to get a cannabis business license. Before starting a cannabis business, you will need to secure the appropriate license, which involves creating a variety of business plans, and compiling numerous other detailed documents about your business and proposed operations. There will also be a required application fee and potentially a licensing fee. Many people who plan on starting a cannabis business work with a professional service in the cannabis industry, like cannabis business consultants, to assist with their application and post-licensing requirements.
How do I Promote a Cannabis Business?
You can promote a cannabis business in a number of ways. One of the biggest challenges with promoting and marketing a cannabis business are marketing regulations. Depending on where you are located, there will be different regulations that will dictate where and how you can promote your cannabis business. One of the best ways to promote your cannabis business is using social media. Typically cannabis businesses cannot run paid social media ads on social media platforms but businesses can make responsible and promotional posts. The best way to verify your cannabis business promotion is compliant with all local cannabis regulations and laws is by reading the regulations or working with a cannabis marketing agency.
