Sources Of Financing For A Cannabis Dispensary
With cannabis legalization sweeping across the U.S., it is becoming easier and easier for entrepreneurs to get involved in the booming industry. However, with this increased opportunity comes a major challenge: how to find funding. To make matters worse, the cannabis industry is so new that banks are often reluctant to offer loans.
If you find yourself in this situation, there are some other options available to you. This article discusses the most common sources of financing dispensaries in Portland and other areas.
- Private Investors
The single most common source of financing for a cannabis dispensary is private investors. However, they may be a better option if you have received funding from an outside investor before, and your business model has proven successful in the past. Unfortunately, more stringent SEC rules on raising capital may prevent this type of investment from going forward.
When searching for an investor, it’s important to find a partner who understands the industry and how it operates. The best way for investors to get involved in this opportunity is by obtaining equity interests, which are rights of ownership in an enterprise. Equity investments offer exposure with higher risk but also with greater potential reward than debt financing or other forms of investment.
- Friends Or Family Members
If you’re fortunate enough to have friends or family members who are willing and able to offer financial backing for your new Portland Marijuana Dispensary, approach them. However, they should fully understand the risks of financing a cannabis dispensary.
Experts advise that you ask your friends to help you finance your cannabis business at its early stages because they can provide the capital to help you get off the ground. When your dispensary has grown, though, you may need more funding sources.
- Development Funds
Development funds are a type of investment that is made to help the business grow. It can be equity or debt stake in the company, which means it will either get ownership shares from the company as part of its return on investment or make payments for interest and principal like with borrowing money.
The investor makes this agreement at a particular stage based on the desired return on their investment. Normally, the investor will contribute a percentage of equity and take an ownership stake in the business. The amount they pay for this equity is determined by several factors including, the size of the cannabis company, whether they are investing with anyone else among other things.
Fortunately, some states have created cannabis development funds that can be tapped to help with the cost of opening a dispensary. In California, for example, cannabis entrepreneurs can apply to get up to $30 million in loans or grants from the state’s Department of Cannabis Regulation.
Crowdfunding websites offer platforms that make it easy to set up a campaign page with specific goals, deadlines, and incentives in order to encourage people who visit those pages (often called visitors) to donate funds.
If you’re already in the cannabis industry and want to expand your business with a new dispensary location, crowdfunding can be an excellent option because it is often easier than traditional methods of financing.
There are many sources of financing for a cannabis dispensary. Friends and family members can be a good starting point. But if you want to grow your business further, crowdfunding and development funds can be more ideal.