Mid-October of 2018 was a big month for Canadians with the legalization of cannabis. A lot of talk of laws, regulations and the difference rules from province to province but the one fact is that a large number of small business owners are getting into the cannabis business! So the question, is there funding for your cannabis business in Canada?

If you’ve decided to jump on the cannabis business band wagon it can get difficult to obtain financing from banks and even private investors to help you fund the small business. It’s still a new idea (only a few months in). Banks and private investors are a bit wary of the “funding for the pot industry”, but there are many options to getting your cannabis business funded.

In this article we are going to discuss how to get your cannabis small business funded, so be sure to pay attention to important topics found in the below article:

• Financing options for cannabis businesses in Canada
• Getting a bank loan for your cannabis business
• Eligibility criteria for getting cannabis business funded
• What can cannabis business funding be used for
• Costs of borrowing money for your cannabis business
• Funding your cannabis business via Canadian government
• Cannabis business regulations by province

How to get funding for your cannabis small business

Getting funding for your cannabis business in Canada is a multi step process. While it may be difficult, it’s not impossible.

Today, more and more business owners are popping up involved with the cannabis industry and one of the steps they are taking advantage of the market boom is to get funding to help them startup, to hire and train staff, to purchase tools and equipment..etc

Financing options for cannabis businesses in Canada

Traditional Financing Institutions:

While not all banks will offer financing for cannabis businesses just yet, you may be able to find a traditional lender that will approve you for a business loan to start or grow your cannabis business.

Business Loans From Private Financing Companies:

Some private lenders focus strictly on the newly introduced cannabis industry, thus providing funding for cannabis businesses and work to meet their unique needs. You can get a standard term loan from an alternative lender to pay for large, one-time expenses.

Business Lines of Credit:

Alternative financing companies also offer lines of credit to help cannabis businesses cover ongoing expenses. You can access up to your credit limit continuously, which can help you over the course of many years

Real Estate Borrowing Options:

These secured loans can be used to buy or refinance the buildings or land you need to run your cannabis business.

Equipment Loans:

Also available through alternative financing companies, cannabis businesses can use this loan to pay for tools, equipment and supplies.

CrowdFunding:

To get funding for your cannabis business, the crowd funding industry businesses often turn to crowdfunding websites like GoFundMe to raise capital for your business. Some websites also allow you to offer investors equity or shares in your business which is a great way to secure it.

Private Equity Firms:

Financial firms may be willing to offer short-term high-interest loans or funding for a large stake in your company. If you’re not willing to give up some of your ownership, look elsewhere for funding.

Personal Loans:

If you’ve got a good credit history, you might have better luck getting approved for a personal loan, which you can use to start or fund your cannabis business. Keep in mind you’ll be personally responsible for paying back a personal loan, even if you use it for business purposes.

Home Equity Loans:

Homeowners can also borrow against the value of their houses with a home equity loan or line of credit. You can usually take out up to 80% of the equity you own in your home.

Getting a bank loan for your cannabis business

Cannabis may be legal across Canada but the process of getting your small business funded requires a bit of work.

Many rules and regulations are placed on cannabis businesses and they vary from province to province.

With that, not all banks provide financing to Cannabis business owners. To find out, it’s important to develop your business plan and take the necessary steps prior to contacting the banks to find our if they finance cannabis businesses and if so, how much are you eligible for.

For example, in June of 2018 the Bank of Montreal signed a loan for $250 million dollars with a large cannabis company. Shortly there after other banks started jumping on board with the cannabis industry to fund other small businesses getting started. Overall, it does seem the trend is moving forward in all major banks starting to finance cannabis business owners, so take the first step, develop your business plan and go apply!

Eligibility criteria for getting cannabis business funded

Like any other small business, not all businesses are eligible to get funded. It is important to know the eligibility criteria before you get started.

In order to apply for a cannabis business loan or funding in general, certain information needs to be provided. Some information such as your business plan, income statements, expected expenses and more may be required.

If you’re seeking funding from private investors; the more information you provide the better. Consider having the following documentation and information ready in order to ensure a quick response time and that you meet the eligibility criteria:

• Ensure you have a fair to excellent credit score
• Complete a background check is completed along with a criminal record check
• Be sure to have your business plan ready
• If operating (provide the minimum gross monthly income report)
• Register for a business bank account

When providing this type of information to potential lenders who will be able to fund your cannabis business be sure to provide accurate information.

Please note: The cannabis industry is strictly enforced and while it may be tempting to simply just apply for “business funding” without disclosing the industry, or stating the wrong industry in order to get funded, it could have severe penalties.

What can cannabis business funding be used for?

Cannabis business loans are a lot like other loans: You can use them to cover almost any expenses related to your small business — as long as it’s legal in your province or territory. Here are some common expenses cannabis businesses can use a business loan to cover:

• Cannabis business licensing fees.
  Starting a new business? You’ll need to get a business license to register your business with local authorities.
• Grow house costs.
  Setting up and maintaining a grow house is expensive — you have to have a strong grip on the indoor climate to get the best product. Costs include land, buildings, electricity, water and other costs.
• Dispensary costs.
  Running a dispensary can come with daily recurring costs that your business might not be able to afford when it’s just starting out — like paying your rent and bills. You may benefit from opening a line of credit to cover ongoing expenses.
• Hiring new staff.
  Bringing new people on board can increase productivity and future revenue — but you’ll need to be able to pay their salaries first.
• Paying for equipment.
  Many cannabis business lenders offer options for leasing or buying new equipment that you will need to keep things running smoothly.
• Utilities.
  Growhouses especially might want to consider taking out a line of credit or business loan to cover those high electricity and water costs.
• Rent, land or real estate costs.
  You’ll need a place for your business to operate. A cannabis business loan can help you rent or buy your first piece of real estate or expand your current operation.

Costs of borrowing money for your cannabis business

Just like borrowing money from any funding source, the money often has to be paid back. When borrowing money for your cannabis business in Canada there are generally a fee to consider and understand.  The fee being “interest of the borrowed money”.

The interest of the funding depends on who is providing the funds.

Lenders charge a percentage of the amount you owe each month, which they then add to the amount you repay. For cannabis businesses, interest rates typically start as low as 4% and go up to 20% or higher, depending on the source.

Before you borrow funding for your cannabis business in Canada from any institution or private investor be sure to know how much it will cost you and if you can afford it.

Cannabis business via Canadian government

Finding funding for your cannabis business in Canada through government agencies is always an excellent option for small business in Canada to take advantage of. Grants, government loans and tax breaks are given to small business owners across Canada to help them with starting up, hiring, training, with the purchase of tools, equipment, paying for marketing and advertising, to improve cash flow..etc

With the regulations that comes with cannabis businesses, it’s important to know that the government of Canada does not have funding programs dedicated to just the cannabis industry. However you still may be able to take advantage of the nearly 1,000 funding programs offered by the government for small business owners.

Just like with any funding application, cannabis funding applications to the government of Canada must be accurate, have a business plan and must be sent to the correct funding agency in order to even be considered. Contact CanadaStartups.org for help in learning what may be available for your cannabis startup.

Cannabis business regulations by province

As of October 17th 2018, the Cannabis Act is in full effect, enabling and legalizing cannabis across every province and territory across Canada.

Before you look for funding for your cannabis business in Canada be sure to know the laws.

There are many laws and regulations surrounding the cannabis industry which includes the act of buying, selling and growing the cannabis. Having an accurate understanding of the laws could mean the difference between success and failure of your business – or even jail time.

In Canada, each and every province and territory is responsible for deciding on the following:

• How cannabis can be sold
• Where cannabis stores may be located
• How stores must be operated
• What the individual possession limits are for customers
• The minimum age required to purchase cannabis
• Where cannabis can be used in public
• Requirements on personal cultivation

The legal age in most provinces is 19 aside from Alberta and Quebec where the legal age is 18.  For the territories, Northwest Territories, Nunavut and Yukon the legal age is 19.

Funding For Your Cannabis Business in Canada

In summary, funding for your cannabis business in Canada may be legal from a number of sources including the banks, private lenders, investors, government agencies..etc; however in order to be eligible, certain factors and criteria must be met.

When applying for funding for your cannabis business, treat it like any other business and take the steps required to get started – think Business Plan.

To get a better idea of what kind of funding options exist in terms of private investors and government agencies – be sure to get in touch with the small business experts at Canada Startups by calling 1-800-288-9691 right now, or fill out the Funding Calculator Tool to see if your business may be eligible.