Find the Option That’s Best For You
The types of financing available may depend on whether your business works directly with cannabis or is in the ancillary marijuana industries.
Exploring all potential options will help your company find the most beneficial type of funding.
Contributions given by a person or an organization, for a particular purpose. Grants often do not require you to pay back the grant, however the eligibility terms of the grant can often be highly specific . Also, because the grant may be based on a variety of different criteria or requirements, it may be very competitive and difficult to be able to secure the grand funding, especially if it’s limited to just a few recipients.
An investment offering is a common way that startup companies raise initial funding. It is also a strategy that certain businesses use when expanding a company’s operations or when making a major change to the company. With an investment offering, in consideration for a person or company giving you money or other resources, you will be providing the contributor with equity, a profit share, or a debt instrument.
A traditional form of fundraising which requires the borrower to repay the loan, often plus interest. The reason that loans are preferred by some is the fact that loans can be easier to obtain than investments or grants. With loans, assuming the person or company is approved, the borrower is typically guaranteed to receive the funds. On the other hand, with grants and investments, there is no guarantee and there is much more uncertainty.
Although not a particular form of fundraising, finance in the marijuana industry is a similarly vital topic in this section. Often considered one of the largest factors which hold back businesses in the industry, businesses and individuals who deal directly with cannabis are unable to utilize traditional banks in their conducting of business. This has caused serious headaches and issues across the country.
Financing in a Time of Uncertainty
Securing funding for your cannabis related business on a state or local level may make it seem like the industry is one in the same as the rest of the nation’s enterprises. However, when the industry is taken into consideration on a federal or interstate level, the landscape changes. As a result of the continuing federal prohibition of marijuana in the United States, essentially every major bank which has offices or locations in different states are immediately not an option.
While the industry hunts for a solution, it is essential that you take advantage of the resources and information available to learn how to get into the best position possible, until the banking matter is finally resolved for California’s cannabis industry.
Some of the biggest issues which plague the cannabis industry in California, and around the country, are the limitations that not having a legal bank option brings with it:
- Cash only sales
- Security concerns with large amounts of money
- Salary & Contractor’s Compensation
- State tax payments only accepted in cash
While there are options available and certain solutions have been found in certain instances, the industry in general suffers from these issues. Even where alternative options have been found, there’s still no industry-wide security for companies working directly with cannabis.
Know Your Options
With financing being such an essential component to the development of your business, it is important to be able to make an informed decision as soon as possible. Evaluate the different types of fundraising options that may be available to your business, and weigh the pros and cons of each potential pathway to determine what the best financial situation is for your company.
To help you narrow down your choices, California Weed Law provides access to resources and finance professionals which will help cater finance plans and scenarios to get you closer to reaching the fundraising goals for your particular business. One of the first and major discussion points is whether your company works directly with cannabis or is instead on the ancillary side of the marijuana industry.
Before ruling out an option, make sure that you know the facts and the current law to avoid overlooking potential options which could be ideal for your company.
- Private grants
- Public Grants
- Federal Government
- State and Local Government
- Grant Information
- Provide investors with an ownership interest in your company
- Profit Share
- Provide investors with a share of profits earned by from the company
- Provide investors with lower risk and shorter term repayment options
- Credit Unions
- Government (state/federal)
- Individual Lenders
- Corporate/Organization Lenders
- Investment Raise
- Inventory Costs
- Location/Premises Upkeep & Compliance
How Important is Choosing the Right Type of Funding?
Although connections, experience and knowledge are vital to the success of any company that is just starting up, there is an even more important component. Without funding, the chance for the company’s success is rather bleak. But, just as importantly is where the funding comes from, and what are the terms and conditions to your company being able to receive those funds.
Although there may not seem to be a substantial difference between the different choices that are outlined in this page, the consequences of choosing a funding method that is not correct for your business can be devastating. The different methods of fundraising that are explained in this page are meant to give you an idea of some of the options that are out there.
Does your business work directly with cannabis products?
How substantial will the startup costs and overhead be for your company?
Do you already have any source of funding available?