The cannabis business is rapidly expanding, and each sector of the supply chain requires specific real estate solutions. However, obtaining finance for these businesses remains difficult owing to the persistent federal prohibition of cannabis in the United States.
While obtaining money might be difficult, there are different methods available to meet the individual demands of each stage in the cannabis supply chain:
Cultivation & processing
Land & facility acquisition:
Private equity and venture capital
For large-scale enterprises with strong development potential, private equity companies or venture capitalists can be approached. However, prepare to give up some stake in the company.
Specialized lenders
Several lenders specialize in the cannabis business, providing lending alternatives for land purchase, construction, and equipment financing. Be prepared for higher borrowing rates than typical lenders.
Sale-leaseback agreements
Consider working with a real estate investment trust (REIT) on a sale-leaseback deal. This enables you to sell your existing property to the REIT and lease it back, providing instant funding for development.
Operational needs:
Equipment Financing
Lighting, ventilation, and processing apparatus can be financed through specialist lenders or equipment leasing businesses.
Line of credit
Secure a line of credit to cover operational expenditures such as fertilizers, insecticides, and utilities, allowing you to manage changing cash flow.
Manufacturing & distribution
Facility acquisition & renovation:
Cannabis REITs
Investing in cannabis REITs allows you to participate in the sector without actually owning or running a facility. This might be an appealing alternative for smaller companies looking for diversity and reduced initial expenditures.
Joint ventures
Collaborate with established companies in the sector to co-finance and co-own processing facilities, utilizing their knowledge and potential for better financing conditions.
Mezzanine financing
This hybrid debt-equity solution adds money to traditional loans while generally offering cheaper interest rates than pure equity investments.
Logistics & transportation:
Small Business Administration (SBA) Loans
Depending on your location’s particular legislation, the SBA provides a variety of lending options that may be accessible to cannabis businesses. Investigate and communicate with an SBA-approved lender for eligibility.
Merchant cash advances
This option offers rapid access to funds but has hefty costs and short payback terms. Use with caution and only as a final resort.
Retail & dispensaries
Location & storefront acquisition:
Owner-operator financing
Traditional bank loans or personal lines of credit may be an option for experienced entrepreneurs with a great credit history and personal assets looking to purchase a retail location. However, laws may differ by state, and qualifying might be difficult.
Crowdfunding
Platforms such as Wefunder and FundCanna allow you to raise funds from individual investors, providing an alternative to traditional finance.
Angel investors
Individuals interested in helping the cannabis sector might give seed capital for innovative dispensary operations. However, be prepared to provide attractive conditions and maybe give up some stock.
Inventory & point-of-sale systems:
Inventory Financing
Secure operating money to finance inventory purchases from specialized lenders who understand the unique demands of cannabis businesses.
Equipment leases
Lease point-of-sale systems and security equipment rather than acquiring them entirely, lowering initial expenses and freeing up cash flow for other purposes.
Real estate finance for the cannabis business necessitates meticulous preparation, strategic thinking, and a thorough awareness of the sector’s distinct difficulties and prospects. Alta Real Estate Fund is the perfect option if you are looking for a company that offers cannabis financing, cannabis real estate lenders, or financing for cannabis. They understand their client’s businesses and needs and come up with creative tailor-made finance structures that make the company’s performance simpler and more efficient. Write to ir@alta-financial.com or visit their website https://www.alta-fund.com/.