cannabis business loans

California Cannabis Business Loans

The total economic impact generated by cannabis sales in the U.S. is expected to top $100 billion this year, up more than 12% from 2022, according to MJBiz Factbook. More and more states are legalizing the sale of cannabis for medicinal purposes so that number is likely to rise significantly in the future.

Our focus here is on California, which was the first state to allow for medicinal cannabis use. The Compassionate Use Act was approved by voters in 1996; cannabis is legal for medical and recreational use by those at least 21 years old. But that doesn’t mean it will be smooth sailing if you’re interested in getting a California cannabis business loan.

Since cannabis is still classified as a Schedule I controlled substance by the FDA, it is illegal on the federal level. As a result, most financial institutions—banks, credit unions and even credit card companies—can’t provide lending or banking services to cannabis businesses. But that doesn’t mean you’re out of luck. We answer some common questions about cannabis business loans below.

How can I obtain financing for my cannabis business in California? There are a handful of credit unions in the state that will work with cannabis businesses—but they are not accepting new customers, have lengthy waiting lists and operate anonymously. In addition, they may provide deposit services but not loans or other financing options. Better alternatives are hedge funds and investors specializing in cannabis financing or commercial lenders that operate outside of the traditional financial services space.

What are things to look for when it comes to financing in California? The most important thing is to work with a legitimate lender rather than a predator. There unfortunately are a number of predatory lenders that have popped up, understanding the financing challenges cannabis businesses face, are charging interest rates of 40% to 50% of their loans and pretending to offer a legitimate way to accept credit cards when their currently is no such thing. Ask a prospective lender about the documentation required to receive financing and if it seems skimpy—i.e., too good to be true—they’re probably not legit.

What do I need to know about running my cannabis business in California? As noted in the answer above, cannabis businesses are not allowed to accept credit card payments at this time so they are cash businesses. You may want to consider installing an ATM for customers who are unaware they can’t use plastic to pay. You must also be prepared to securely handle, transport and store large amounts of cash.

How do I get licensed for a cannabis business in California? There are three different licensing authorities, depending on the type of license being issued:

  • Bureau of Cannabis Control—commercial licenses for medical and adult use cannabis to retailers, distributors, testing labs, microbusinesses and temporary cannabis events
  • California Department of Food and Agriculture’s CalCannabis Cultivation Licensing—licenses for cultivators of medicinal and adult-use cannabis
  • California Department of Public Health’s Manufactured Cannabis Safety Branch—licenses manufacturers of cannabis-infused edibles for medical and recreational use

Applicants must be at least 21 years old and will be levied a license fee from $500 to $300,000, depending on the purpose of the license and size of the company. You must demonstrate you understand how to comply with state and local regulations before you will be approved.

How long does it take to receive funding once my cannabis business is approved? Most alternative lenders will release the funds on the same day you are approved.

What types of financing does my cannabis business have access to? Depending on the lender you choose, you may have access to equipment financing, lines of credit, cannabis working capital loans, dispensary loans, vendor financing and more.

Contact Clear Skies Capital today at 800-230-9822 to discuss your cannabis business’s financing needs.