The cannabis industry is estimated to grow by more than $45 Billion by the year 2025, but most institutional investors remain reserved. It’s only a matter of time before more money floods the market and cannabis becomes federally legal. in the meantime, you may need to get creative when searching for funding.
There are plenty of investors out there clamoring to get their hands on their own piece of this exciting new market. First, you’ll need a legitimate business plan and a convincing pitch. Once you have that covered, all you need to do is know where to look.
Continue reading for a full guide on securing capital.
To receive business funding, you’ll typically need to give up either equity or take out debt. With equity, you get money in return for giving up some ownership percentage in your business. On the other hand, taking out debt means you’ll need to pay the money back over a set period of time (along with any interest).
If you decide to take out debt, you have a few different funding options to choose from. These include secured lines of credit, business loans, personal loans, credit cards, and more. Debt financing has its advantages including retaining ownership of your business, the ability to set specific repayment terms, and the ability to choose from different loan types to fit your needs.
With equity financing, your options tend to be funding from friends or family, angel investors, venture capital firms, and more. For the most part, equity funding is used among younger companies and startups that need access to short-term funding.
Investors typically care about one thing and that’s profits. The cannabis industry might scare some larger institutions away, but promising companies can still find investors with deep pockets. Some people that may be willing to invest in your business are venture capitalists, angel investors, and private equity firms.
In order to woo potential financiers, you’ll need to prove the worth and strength of your business. You’ll want to prepare for questions regarding your business plan, existing revenue, proper licensing, ownership structure, etc… Some popular cannabis funders include MedMen Capital, Tuatara Capital, Casa Verde Capital, Privateer Holdings.
Securing a loan for a cannabis company is tough, but a non-traditional source of capital like crowdfunding can work for some businesses. The SEC has specific rules for crowdfunding that allow anyone to invest $2,000 in a small business in exchange for some sort of stake in the company. More specifically, a company can legally accept up to $1 million directly direct from crowdfunding. One popular platform for cannabis funding is Fundana.
There are typically two types of crowdfunding routes to go down including rewards or equity-based funding. They both have pros and cons so it’s a good idea to carefully consider your decision for crowdfunding.
Another possible way of finding funding is to network at cannabis industry events and seek out active investors. The industry is growing like crazy and there happens to be lots of individual and group investors looking to join the “coolest” new growing business sector in the United States. These industry events typically offer educational seminars, networking sessions, B2B presentations, and workshops.
A business directory is a list of companies and resources for specific industries. There are plenty of cannabis business directories to look through and even some that are dedicated to helping companies find funding. Some popular options include CannaHedge, Cannabis Business Executive, and MjBizDaily.
You’ll want to come to these events prepared with a plan of action for networking and getting your business in front of industry professionals. We suggest solidifying your business plan and pitch decks. That way you’re ready to properly advocate for your business should the opportunity arise.
If you have trouble finding investors or additional forms of funding, you may be able to secure a business loan with decent terms. Most traditional banks won’t be able to provide funding for cannabis-related businesses, but you may have some luck with online business loans. You can check out some of your options here.
Sometimes it can make more sense to take out a personal loan rather than one specifically for businesses. This is common among entrepreneurs starting out with new ventures. A personal loan will also help you work around the stigma and red tape surrounding lending to cannabis businesses. You can find some good online personal loan options here.
With the growth of the cannabis market, there are now countless individuals and firms with industry knowledge looking for consultancy gigs. Some of these firms specialize in things like marketing or PR, but you can also find consultants with good track records of obtaining funding for their clients. Unfortunately, in the early stages, you may not have the money available to hire a full-time consultant. We suggest perusing various consultancy options to see if there’s one that will work for your business and budget.
Popular Cannabis Consultancy Firms
Finding funding to get your business off the ground is a huge first step towards eventual success. The next step is getting your brand or service out into the market. With tough advertising regulations surrounding the cannabis industry, organic marketing becomes extremely important. That’s where we at Stoned Root come in. We offer high-quality content marketing, SEO, & social media services.
Creating quality content is hard, but we can help. Reach out to us today for a free quote and consultation!