The Best Options for Cannabis Financing

Cannabis financing can be tricky, but with the information and alternatives in this guide, you can secure the cash runway to start your cannabusiness quickly.
Written by:  Mark Saltarelli
Published:  June 29, 2023

Entrepreneurs from every industry need cash flow to drive business growth. Cannabis business owners are no different, but the obstacles they face in securing business funding vary significantly from typical businesses. Higher perceived risk, regulatory restrictions, and federal laws against cannabis make it difficult for cannabusinesses to secure funds. 

Today we’ll cover the basic financing issues for cannabis companies leading the way in medical and recreational use of cannabis. 

  • What is cannabis financing? 
  • Who needs cannabis financing? 
  • What obstacles do companies face regarding cannabis financing?
  • What are the requirements for receiving cannabis financing?
  • Uses for cannabis financing
  • Alternatives to traditional cannabis financing

Download the free ebook: Grow Your Cannabis Business–Overcome These Three Finance Challenges

What is cannabis financing?

Cannabis financing is the process of obtaining business capital through various financial resources to cover the costs associated with running a cannabis-related enterprise. When hearing about a cannabis business, cannabis dispensaries often come to mind. But cannabis cultivators, medical marijuana clinics, and other related cannabis businesses also require funding to drive operations. 

While traditional financial institutions and lenders can provide cannabis business loans, financing is often obtained from private investors or venture capitalists due to the stigma attached to cannabis products. The various options typically available to a startup looking for cannabis financing can include:

  • Personal loans
  • Home equity lines of credit (HELOCs)
  • Business loans or lines of credit
  • Supplier cash advances
  • Credit union loans
  • Equipment financing and leases
  • Investments from accredited investors 
  • Angel investment
  • Crowdfunding
  • Backing from friends and family

Regardless of which form of financing they choose, cannabis businesses must carefully examine legal considerations, interests, and risks to ensure they receive sufficient working capital while protecting their assets.

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Grow Your Cannabis Business: Overcome These Three Finance Challenges

The cannabis industry is experiencing a once-in-a-lifetime boom. Don't let poor cash flow keep you from cashing in.

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What types of businesses need cannabis financing?

There are two types of businesses within the cannabis industry: direct and indirect. Direct cannabis businesses are those that “touch the plant,” such as cultivators, dispensaries, distributors, and laboratories. Indirect businesses offer services that support the direct industry, such as packaging companies, technology providers, and equipment manufacturers. 

Cultivators: Cannabis cultivators produce cannabis plants and components like CBD for both medicinal and recreational purposes. They grow and process plants to create standardized products sold at dispensaries. Cultivators use techniques like adjusting nutrient levels and controlling temperature and humidity to create new strains with desirable characteristics. They must adhere to government regulations and product standards when creating strains and cultivating plants. 

Laboratories: Cannabis quality control labs analyze product samples for potency, terpenes, and contaminants. They provide reliable analytical results to the industry, ensuring all products meet regulatory requirements and industry standards. Labs also offer services such as genetic profiling to trace the plant's origin and authenticate the product. They play a critical role in consumer trust and cultivators' informed decision-making.

Distributors: Cannabis distributors help ensure a safe and secure supply chain for the cannabis industry by handling all steps in the distribution process. They are the link between cultivators and retailers, ensuring that cannabis goods reach the right place at the right time while meeting all government regulations related to compliance and taxation. They also often provide additional services such as inventory management, security, and product tracking. 

Packaging: Cannabis packaging companies provide solutions for both recreational and medicinal products. They offer printing services, including logos, branding, and warning labels that use innovative and custom designs to help differentiate products from competitors. Essential for protecting integrity, they provide an extra layer of security to guarantee quality products by ensuring compliance with health and safety regulations, like child-resistant or tamper-proof packaging. 

Equipment: Cannabis equipment providers are responsible for the production and maintenance of specialized and general equipment used in the industry. This includes a wide range of items, from grow tents and trimming machines to commercial plant driers, extractors, and decarboxylators. They also provide the technology necessary to ensure that cannabis production is safe and efficient, like HVAC systems or water chillers. Cannabis equipment providers help with installation, maintenance, and repair services so that growers have access to reliable tools when they need them. They enable cannabis producers to meet safety standards and ensure quality control throughout the entire process.

Technology: Cannabis-related tech and SaaS software companies design software solutions for the cannabis industry, including inventory management and compliance tracking, plus mobile applications for real-time operations. A suite of analytical tools is also available, optimizing production by gathering data on cultivation and greenhouse environments. These technologies help growers maximize efficiency and profitability while remaining compliant with local regulations.

What are the obstacles to cannabis financing?

Cannabis businesses, particularly those operating in the US, face several obstacles when trying to obtain financing. Cannabis and its derivatives are a schedule I controlled substance in the United States. This means that, despite the recent move by individual states to relax their rules on medicinal or recreational cannabis use, THC remains illegal at the federal level. 

The federal prohibition of cannabis makes it difficult for banks and other lenders to provide funding. Specifically, federal prohibition means that cannabis businesses are ineligible for favorable loans from the Small Business Administration (SBA)

Two sets of restrictions dissuade banks from financing cannabis-related businesses (CRBs): the Anti-Money Laundering Act (AML) and the Bank Secrecy Act (BSA)

  • The AML requires banks to report suspicious transactions related to money laundering and other activities that could be considered illegal or unethical. 
  • The BSA requires banks to report all transactions over $10,000 and provides guidelines for proper recordkeeping. Because cannabis is a schedule I substance, any transaction involving this drug must be reported.

The requirements for both these regulations make it difficult for lenders to confidently offer financing to cannabis-related industries. Lenders that do offer options to cannabis-related businesses often limit their services to ancillary businesses such as general suppliers, labeling and packaging designers, and technology companies like cannabis-specific point-of-sale providers. These businesses, while they support direct cannabis sales, offer a more favorable risk profile to banks since they fall under less stringent legal requirements. 

Though traditional investors may be wary of investing in the cannabis industry due to its uncertain legal standing and liability concerns, options for obtaining funding for a cannabis-related business are improving, providing owners meet the prerequisites for securing credit, loans, or grants. 

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Grow Your Cannabis Business: Overcome These Three Finance Challenges

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What are the requirements for obtaining cannabis financing?

Although requirements vary by state, most cannabis-related entrepreneurs must meet the following requirements: 

Strong personal credit rating: A strong credit rating is vital for securing financing for your business. Sufficiently high credit ratings from the “big three” credit bureaus make it easier to convince lenders to take on the risk. A high credit score gives potential investors confidence regarding timely loan payments. For the major three credit bureaus, a score of 670 or above is in the “good” category.

Adequate credit history: A long history of good credit is essential when applying for financing, so lenders look for those with experience borrowing money and paying it back on time. As part of this, they review the borrower’s credit history, checking for recent activity and missed payments. A strong credit score coupled with a long history of timely payments makes lenders more likely to take on the risk of providing capital and financing for your business.

Bankruptcy-free credit history: Lenders are often risk-averse, especially when handling a higher-risk loan like cannabis funding. Any indication that debt might not be repaid based on past performance is a major roadblock. Bankruptcy stays on a credit report for up to 10 years and might be used as a factor in approving your application. 

Business account: A separate business bank account is required for cannabis lending, as it meets the increased reporting and regulatory requirements of applying for financing. Establish a separate business account under your business taxpayer identification number (TIN) along with any state filing requirements or permits.

US citizenship or resident status: US citizenship or residency is a requirement for borrowing funds to run a cannabis business. Regulations concerning lending and business permits for cannabis businesses may vary. Consult an attorney knowledgeable in this area for specific requirements. 

Business plan: When seeking financing of any kind, a documented business plan with projected revenues, a mission statement, a SWOT analysis, and marketing plans form an important part of your financing application. 

Uses for cannabis financing 

Like many other retail or medical businesses, brick-and-mortar cannabis businesses like marijuana dispensaries and cultivators must source real estate, supplies, inventory, technology, and services to keep the business running. 

Financing for the business often goes toward establishing locations and buying supplies and equipment for production and sales, including: 

  • Purchase or leasing of office or manufacturing spaces for sales, cultivation, and testing
  • Equipment to produce, test, or refine cannabis products
  • Overhead expenses such as payroll costs, taxes, and other operational expenses
  • Research and development funding for new products and processes

However, risk and cash flow issues particular to the cannabis industry make it difficult or impossible for these businesses to get equipment and get off the ground. 

Alternatives to cannabis financing

For companies seeking flexible, cost-effective ways to procure supplies for running a cannibals business, there are some alternatives. However, access to these avenues of financing isn’t universal. Businesses that have cash on hand most often source goods and equipment through group buying or online ecommerce resources: 

  • Group purchasing organizations (GPOs) are third-party organizations that sell supplies to their members at discounted prices. GPOs can help cannabis businesses get the supplies they need without seeking traditional financing. 
  • Some procurement platforms offer services and vendor networks that support cannabis-focused businesses. These platforms provide many benefits for growing businesses, such as price comparisons, reporting functions, and spend management features. With these services, companies save time and money when sourcing products from suppliers, which helps them stay competitive in the market. 

How approaches cannabis financing takes a new approach to cannabis financing, providing risk reduction and reliable access to capital in a way that works for both buyers and vendors. This removes many of the obstacles that keep cannabis companies from reaching their full potential. With vendor and working capital access through, cannabis businesses can get up and running, source equipment, expand into new locations, and explore wider markets. This is how it works: 

  • Cannabis businesses sign up with to buy supplies and equipment from their favorite vendors. 
  • provides flexible, extended net terms with an easy-to-complete verification process. This allows to act as the buyer of record, eliminating the restrictions that block many companies from conducting business as normal. 
  • For large purchases, Order Capital provides up to $500,000 in working capital to fund equipment purchases. 
  • The extended terms and capital access allow businesses to get up and running quickly and start generating revenue before repayment begins. With revenue coming in, the cash conversion cycle (CCC) is greatly reduced, allowing the company to leverage its financing to spur growth and stabilize cash flow. gives cannabis startups the capital and vendor access they need to perform in new markets, providing a competitive advantage as cannabis access expands into new states and territories. 

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In addition to leading-edge advantages for cannabis businesses, provides an easy-to-use interface that simplifies the process of researching prospective suppliers, finding the best pricing and terms, and using data-informed insights to grow a thriving business:

  • Add your favorite vendors and create curated buying catalogs to ensure spend compliance and high-quality ordering. 
  • Use Order Capital for access to competitive pricing and extended net terms for purchases of all kinds. 
  • Rely on comprehensive spend reporting to maintain compliance with financial regulations and demonstrate spend efficiency to investors. 

To see how helps businesses of all types grow their operations effectively, request a demo

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