2024_0413_CSC Blog Post—LOC for Cannabis Companies

Business Line of Credit for Cannabis Companies

California has led the way in legalizing the use of cannabis in the U.S., allowing for medicinal use in 1996 and adding recreational use by those 21 and over in 2016—and business is booming. In 2023, California retail stores sold $5.2 billion worth of cannabis products, representing 17% of legal sales in the country—and that number is only expected to climb.


It’s projected that the California cannabis industry’s total economic impact could be nearly $10 billion annually, as the state remains the largest contributor to overall U.S. sales growth. That means opportunities for success exist but if you require funding to expand your business or get into the market, it’s highly unlikely you will be offered a loan from a California bank or credit union—because marijuana is still classified as a Schedule 1 controlled substance and remains federally illegal. But that doesn’t mean you’re out of luck.


Top Considerations Before Applying for a Business Line of Credit for Cannabis Companies

If you operate an existing cannabis company, make sure all your “ducks are in a row” before submitting an application for a business line of credit to an alternative lender because your track record will be an important consideration. If you’re just getting started, make sure you have a license to open a cannabis business in California, something that requires familiarity with California cannabis laws and the different rules, regulations and requirements for the type of business you wish to operate as well as proof of ownership of a location or rental agreement.


Why Business Lines of Credit Work Well for Cannabis Companies

The beauty of a business line of credit for cannabis companies is that they get access to a pool of funds up to a set amount whenever capital is needed. They have the ability to draw out funds and repay them (with interest) over and over again—the line of credit is there to purchase more supplies, hire more staff or address other emergencies or opportunities.


Other Loans Cannabis Companies May Want to Consider

While a business line of credit has plenty of benefits, there are other business loans that may be right for cannabis companies, including:

  • Working capital loans—A loan that can assist with the daily costs of operating the company
  • Cannabis dispensary loans—A loan that assists with starting a cannabis dispensary.
  • Equipment financing—Funds that can be used to make purchases such as extraction equipment, kitchen equipment, HVAC, building and construction related to cultivation and other components
  • Commercial real estate financing—Funds for refinancing, new construction or expansion projects
  • AR/invoice financing—A receivable financing product that acts as a revolving line of credit and doesn’t require additional collateral


The Bottom Line

The cannabis industry has already seen success in California and there is more to come. Whether you seek to start a cannabis company or expand your existing business, not having the funds to move forward should not be a reason for you to miss the opportunity to be a trailblazer. There are plenty of options out there to secure the funding you need to operate on “high” as a successful cannabis company.


Clear Skies Capital has helped many cannabis companies determine the business loan that’s best for them and get the financing they need in a timely fashion. Contact us today at 800-230-9822 to discuss your company’s needs.