3 Things to Consider Before You Explore Cannabis Business Loans in Arizona

Getting matched with the right Cannabis Business Loans in Arizona is an important step, but launching a marijuana startup is unlike starting any other type of company. Before you start applying, it’s important to become familiar with what lenders are looking for in this emerging industry.

1. You’ll probably need to work with an alternative lender. Most banks are FDIC-insured, meaning consumers who deposit money in them have some level of protection from the federal government in case the bank loses it. That being said, marijuana still is not legal at a federal level, so it’s a no-go with federally-insured banks, even if marijuana is perfectly legal in your state.

2. Most alternative lenders have criteria similar to banks. Even if you’re circumventing banks and sourcing your Cannabis Business Loans in Arizona elsewhere, the majority of lenders are still going to be assessing your risk as a borrower or business, meaning they still care about your credit score, your income, and the number of years you’ve been in the industry. Most expect two or three years of experience at a minimum. That can present issues in states which have made a recent move to legalize. If you’re struggling in this area, you may need to bring on a business partner from another state with some experience. That will help you qualify for funding, but you might also want to seriously consider tapping into his or her experience. No doubt, you’ll be able to avoid some of the common pitfalls startups experience if you’ve got a good mentor.

3. You’ll need to have a comprehensive business plan. When you shift into alternative lending, the people providing the funds want additional assurance you’ll be able to pay the money back. So, unlike traditional lending where it’s mostly based on your credit score and a promise, you actually do need to have a full plan, including budget and timeline.

What Form of Lending is Right for My Marijuana Startup?

The right Cannabis Business Loans in Arizona will vary somewhat depending on what you plan to use the funds for, how long you need the funds, your credit score, and other factors. Crowdfunding is one option MJ companies turn to, but bear in mind that options like Kickstarter tend to work best if you have a tangible good. As an alternative, equity crowdfunding can work, but it also requires you to give up shares of the company. As an aside to this, many of the existing platforms tie you down to specific banks and payment portals. Do your diligence with them because if anyone in the chain is using an FDIC-insured bank, there’s a chance your project could get nixed without warning.

Many entrepreneurs are successfully funding marijuana startups with hard money.

By working with private investors who base Cannabis Business Loans in Arizona of the value of an asset, you eliminate most funding barriers. Although they’re still regulated, as virtually anything involving transaction is, the FDIC is not involved, and you can be funded within a matter of days. Moreover, because it’s a form of asset-based lending, your credit score isn’t a huge concern. However, it’s important to remember that hard money is a temporary solution. During the term of the loan, you’ll usually make interest-only payments, and then will be expected to pay the principal back at the end of the term, either by refinancing or paying off the balance with your earnings.

Dennis Dahlber Broker Ri CEO Level 4 Funding LLCDennis Dahlberg
Level 4 Funding LLC
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About the Author: Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 43 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.

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