The industry surrounding cannabis is not a flash in the pan. It continues to grow, and become less controversial, every day. According to the cannabis research firm Arcview, by 2027 cannabis is expected to be a $57 billion industry worldwide. Within the United States in 2021, $25 billion was spent on cannabis. Although some things about this business section are unique, every company has certain universal needs. One of these is a need for financial guidance for shrewd operation and profits.
Cannabis industry business loans are available to those looking to begin or improve their place in the industry. Some examples of business loans for cannabis industry are use of private equity or capital stack, real estate financing (which secures commercial real estate to use as collateral for a company), invoice financing (to increase cash flow speed), purchase order financing via paying suppliers upfront, inventory financing through large quantity commitments, working capital loans, and sale-leaseback options. Further, some states have legislated social equity programs within their legalization laws. For example, when considering small business loans, cannabis companies should look into lending options in California, Illinois, Washington, Colorado, Massachusetts, Connecticut and New Jersey, or create a news alert for states which have recently begun to legalize to stay abreast on the topic.
Traditional lenders are not often in this marketplace, so detailed research into small cannabis business start up loans is key. When comparing, look for fair and competitive pricing as compared to other cannabis business quotes, a simple application in understandable verbiage, easy payment options, and a commitment to continued customer service. All of these features will assist with minimizing loan-related frustrations. It is also typically best to avoid commission-driven lending brokers when searching for business loans for cannabis industry, as your best interests may not always be at the forefront. Additionally, carefully read and inquire about any potential hidden fees for processing and early repayment.
While the options for small cannabis business start up loans can be overwhelming, time and money carefully spent can be quite fruitful. Consider the city of Los Angeles, where cannabis companies have to secure a lease before they can get a license. Getting the lease can be challenging, but this requirement has created an opportunity for investors and lenders to work themselves into the flourishing trade. When armed with the right information, both business owners and landlords can boost their bottom line through intelligent financing.
“When putting together a hybrid capital stack the most important thing is to do your homework so you don’t waste everyone’s time,” according to Charles Adkins, founder of the real estate investment bank The Titan Group. Adkins has underwritten and placed more than $3 billion of complex capital structures over the past 16 years, mostly from private investors. “Even though private money and mezzanine equity are highly flexible, they also tend to stick to their niches. You have to know what your capital providers specialize in so that you pick one that will be comfortable in your specific deal. You may pay a higher rate or give up some control, possibly even allow them to be active in the investment, but if the deal makes sense you will end up with a ‘no lose’ situation.”
In a recent interview with Rob Sechrist, President of Pelorus Equity Group, cannabis was identified as one of the largest new asset classes in the U.S., a segment of real estate representing about $50 billion. This is due to industry popularity as well as the trend of cannabis properties generating up to 15 times more revenue than non-cannabis properties. Cannabis-use buildings require very specific infrastructure such as sensitive light and temperature regulation and specialty-use equipment, and therefore meticulous management of working capital is essential.
Those looking for real estate inspiration beyond warehouses, labs and dispensaries have found new territory in cannabis consumption lounges, which are becoming popular around the country in states that allow recreational adult use. One example in the United States is in Nevada, where less traditional venues such as massage studios, arcades, and comedy clubs are expanding their refreshment offerings. Lounges are anticipated to open on bustling corridors, both commercial and industrial, including near the famous Strip and in the downtown Arts District. Alaska, California, Illinois, Michigan, New Jersey, New York, and Pennsylvania also allow social consumption in designated areas.
With all of Canna Real Estate Group’s strategic capital source relationships, we have experienced insight to guide the way for our Clients’ optimized use of private equity, the exploration of capital stack stabilization and the efficient sequencing of structured debt solutions. Canna Real Estate Group can help you locate and secure qualified property for purchase or lease and connect you with the right cannabis industry business and/or construction loan providers that fit your project’s needs. We’d love to hear about your project. Let’s start a conversation!