The 6 Biggest Costs of Starting a Cannabis Business

The legalization of cannabis is taking the country by storm. If you’re a cannabis connoisseur, you may have contemplated opening your own cannabis business. But where to begin?

‌The cannabis industry is a tough nut to crack and comes with many costs other businesses don’t. The costs of licensing, real estate, and inventory are very high. Not to mention there are zero federal tax breaks. 

How Much Does it Cost to Start a Cannabis Business?

Cannabis businesses are a very risky venture and you will have to spend a lot of money before you can apply for the license. Cannabis is a highly regulated substance and no matter which state you’re in, you will need a lot of start-up capital.

Application and Licensing

The application fee averages between $4,000 to $6,000 and is usually non-refundable. Pennsylvania has the highest application fee at $200,000! Before you can apply for a cannabis license, you will need to set up your operation. The application will require information such as:

  • Detailed floor plans
  • Financial projections
  • Incorporation documents
  • Documentation of a professional security system

Real Estate

The cost of real estate varies greatly depending on the state, city, and county. Michigan currently has some of the lowest real estate costs. No matter where you decide to open your business, be prepared to sink around $50,000 into renovations.

Security

A big portion of your renovation expenses will go towards setting up the security system. You will need to hire an expert if you want your application to be successful. Your state government will need to be assured that your products won’t get into the hands of minors. A few self-installed cameras aren’t going to cut it.

Staffing

The minimum wage and the cost of living also vary depending on where you are. Currently, the federal minimum wage is $7.25 per hour. Legislation has been introduced that could end up raising the minimum wage to $15 per hour. On the other hand, experienced budtenders are going to cost more than minimum wage. 

Taxes

Most businesses get a lot of federal tax breaks. Everything from real estate depreciation, supplies, and inventory can be written off. This is not true for cannabis businesses because cannabis is federally classified as a Schedule 1 drug, the same as cocaine. 

Cannabis businesses are also heavily taxed. In California, sales tax on cannabis can run up to 40%.

‌Banking Cost‌s

Most banks won’t deal with cannabis businesses. Banks are federally insured and cannabis isn’t federally legal. You won’t be able to get cannabis lending or business credit cards through your bank.

You’ll likely need to find a private cannabis bank or credit union that’s willing to do business with you. However, be prepared to pay some hefty monthly holding fees. Banks are required to submit a lot of extra paperwork for cannabis businesses.

Bespoke Financial is Here to Help

Bespoke Financial is the first licensed commercial lender focused on growing the cannabis industry. Bespoke Financial is here to help you grow your business by offering dispensary loans. Whether you need inventory financing, purchase money financing, or invoice financing, we’re here to meet your financial needs.

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