In the United States, cannabis is still a Schedule I drug under federal law. This means that marijuana-related activities are currently illegal on the federal level and in most states, even if they are legal at the state level. However, this does not mean that cannabis entrepreneurs can’t get funding for their business ventures or help with paying off their debt. In this blog post, we will discuss some of your options when it comes to financing your weed-related endeavors!
- Friends and Family: If you happen to have friends or family members that are willing to invest in your business, then the first place you should start is with them. Make sure they understand what it means when they’re investing in weed though because this may not sit well with everyone!
- Angel Investors: An angel investor will put up a large amount of capital, usually at least $150k or more. They will only want to invest in companies that they believe can generate returns on their investment and if you’re looking for someone with deep pockets then this option is worth exploring.
- Venture Capitalists: A venture capitalist invests in startups and small businesses that have a lot of potentials, but are still in the early stages. They’re not typically interested in companies that have already generated profit because they want to see growth and will usually only invest when there is a significant upside opportunity for them as well!
- Small Business Grants: The first place you might look if you’re looking for financing options would be for funding is in small business grants. Many programs offer to grant money to startups, and you could be eligible for one of them!
- Crowdfunding: A new way to raise capital is by crowdfunding through a site like Kickstarter or Indiegogo. You’ll need an idea with really good potential as well as some experience getting the word out about your product, service, or idea before this approach will work for you though.
There are two ways investors can take part in financing cannabis businesses – they can invest their capital (e.g., personal savings) into the company, or they can provide funds from external sources such as banks/investors (angels/venture capitalists). The latter option allows entrepreneurs more certainty when it comes to capital and reduces the amount of cash-on-hand that they need for day-to-day operations.
Investors can also offer their expertise in an advisory capacity, as a service provider, or by providing other forms of non-financial support such as leases/equipment purchases or introductions to potential partners with complementary offerings. A successful cannabis company will likely require all three types of financing at some point during its growth cycle – personal investment (equity), external funding from banks/angels/venture capitalists, and expert advice.
Many programs offer to grant money to startups, and you could be eligible for one of them! You’ll need an idea with really good potential as well as some experience getting the word out about it.
To get the most funding for your cannabis startup, you need to have a solid plan in place as well as experience with similar businesses or projects that were successful. Having an idea is only half of what’s required! You also need plenty of experience and be able to show what success looks like before someone will give you money.
If all else fails, try crowdfunding sites like Kickstarter – who knows? It might just work!
You may want to consider using other forms of financing such as debt financing if equity capital isn’t available (or desired). Many programs offer grant money… Equity Capital refers to funds invested by investors into a company where they receive shares in the company. Debt financing is when the borrower owes a debt to the lender, and they repay it at a later date with interest attached.
Cannabis shares are another form of equity capital that entrepreneurs can use for funding their business idea. These investments range from $200-$500 per share depending on how much you want to invest in your favorite cannabis startup!
One can buy shares in a “Private Placement” where entrepreneurs have the chance to pitch their idea and share information about their company.
If you think crowdfunding is too risky, then consider that there are many different alternative forms of financing for cannabis businesses. With government regulation coming into place soon, we’ll likely see more investors interested in this industry!
Share your thoughts on the matter below.
There are many different alternative forms of financing for cannabis businesses, with government regulation coming into place soon it’s likely we’ll see more investors interested in this industry! Share your thoughts on the matter below.
Do you think equity capital would be a viable option? Do you have any other form of investment suggestion that we missed out on here? Let us know and make sure to follow up with our blog so that you don’t miss another post like this one!
Only legal adults 21 years or older can invest in these securities because marijuana is still illegal under federal law. Cannabis shares are not available yet but once they become an opportunity, only “accredited investors” as defined by the SEC will be able to invest.
As Canada moves forward with legalization legislation, businesses in the country are looking for ways to finance their operations and grow.
The good news is that there are many alternatives when it comes to cannabis financing too! Here’s a list of some alternative forms of cannabis business financing:
- Equity Capital (Regulation dependent)
- Debt Financing – This form of lending includes loans and lines of credit from banks or other financial institutions as well as private lenders who may have connections within an industry or sector.
- Crowdfunding/Equity Crowdfunding – A recently popularized method of raising funds through small investments given by many individuals online which is legal under U.S securities law if the crowdfunding is an SEC-registered broker-dealer or if the securities are being offered in a Regulation A+ offering.
- Microfinancing – Funded by both small and large investors, these loans can be used to provide people with access to affordable financial services such as banking accounts, loans, and insurance policies.
- Private Equity – This less common form of financing often occurs when one individual puts up their funds to start a business which they then coown 50% of the company.
In addition to this list, there are also crowdfunding platforms like Kickstarter that help generate revenue for entrepreneurs who need funding but don’t have any other options available!
Challenges: Although promising, cannabis businesses face various challenges when it comes to financing.
- Price – High prices in the industry make it difficult for those with little capital to start their own cannabis business.
- Accessibility – It’s hard for people who are not of legal age or live in a state where marijuana is illegal to even be able to invest in this market!
Therefore, one way that entrepreneurs can help themselves with these conditions is by going through an equity crowdfunding platform like Fundrise which offers investments and loans at low rates so you don’t have much money tied up before your enterprise starts generating revenue.