While cannabis may be legal on the state level in several states across the country, it’s still illegal federally. As such, cannabis businesses can’t get financing from a traditional bank or credit union like every other company can. However, there are alternative lenders out there who specialize in cannabis financing solutions.
A popular cannabis financing option is inventory financing. Cannabis inventory financing is a short-term solution that you back with an asset. In this case, that asset is the inventory you purchase with the funds you borrow. That allows you to buy what you need now, and then you pay your lender off over a set term. If you’re looking at your financing options, here’s what you need to know about cannabis inventory financing.
Benefits of Cannabis Inventory Financing
Cannabis inventory financing offers several significant benefits:
Maintain Positive Relationships with Your Vendors
Your relationships with your vendors are everything. Cannabis inventory financing allows you to maintain those positive relationships by paying your vendors directly. You then pay back your lender over time.
Obtain Lower Pricing
With inventory financing, your lender pays your balance upfront. That may help you negotiate lower pricing from your vendors.
No Personal Collateral Needed
The inventory you purchase acts as collateral for your cannabis financing. You don’t need to provide anything extra.
Grow Your Business
Inventory financing gives you access to funding more quickly than conventional loans. That not only enables you to get the inventory you need to keep your business running, but it can also allow you to purchase even more inventory to meet growing customer demand. In turn, that can help you grow your business.
Who Is Cannabis Inventory Financing For?
Cannabis inventory financing can be an ideal solution for numerous types of businesses in the industry, including:
- Delivery companies
You may be an ideal candidate for inventory financing if your business is doing well and you need a little financial assistance to keep up. If you’re looking to tide your business over during a slow period, you might want to look for a different solution.
While you might not need to fill out as much paperwork or provide as much documentation as you would for a conventional business loan, this type of cannabis financing still requires some information from you. In addition to filling out an application, you may need to provide:
- Financial records (balance sheets, income statements, etc.)
- Sales projections
- Annual revenue
- Business tax returns
While not necessarily required, you may also want to show your inventory management system. That can prove to a potential lender that you aren’t requesting to purchase more than you can realistically sell.
How Cannabis Inventory Financing Works
The process for cannabis inventory financing is pretty straightforward. It begins when a vendor ships your products to you. They also issue you an invoice, which may be due in 30 days. You request financing, and upon approval, your lender pays your vendor directly. You sell your product and pay back what you owe (plus interest) to your lender. The term of your cannabis financing is typically longer than that of the original invoice.
Are You Ready to Get Started?
If you need a little financial assistance meeting customer demand and growing your business, cannabis inventory financing may be an ideal solution. Are you ready to get started? Visit Bespoke Financial to learn more and apply for inventory financing today.