How Much Is Too Much for a Cannabis Business Loans?
If opening a business were as easy as coming up with a great idea, more people would do it. The truth is, starting any type of business will require hard work and dedication – when you add to that starting a business in a new and emerging market, you may find yourself with even more questions about how to get started.
As with most businesses, one of the most important factors to consider before you get started is where you will get your capital. Specifically when it comes to starting a cannabis business, obtaining financing won’t be as simple as walking into your neighborhood bank and applying for a business loan. Luckily, a reputable commercial lender is a great option for obtaining cannabis business loans in Oregon.
Factors to Consider When Applying for Cannabis Business Loans in Oregon
When applying for cannabis business loans in Oregon, it’s important to consider the capital that will be required for different factors of the business. The amount of money you’ll need for your cannabis business loan will depend on your circumstances, but you’ll want to budget for things like:
- Licensing fees: Oregon has several types of licenses, which we’ll discuss in more detail below, ranging in prices from $1,000 to over $5,000
- Registering your business with the Oregon Division of Corporations
- Legal fees (it’s very helpful to have an attorney guide you through the varying state and local regulations applicable to operating a cannabis business in Oregon)
- Real estate
- Product and marketing
Obtaining a Cannabis Business License in Oregon
Oregon has several categories of business licenses to offer in the cannabis industry, ranging from producer/grower, wholesaler, retailer, and laboratory services, in addition to processing or researching. Oregon also offers a separate business license for hemp. Your cannabis business may hold multiple license types, depending on your focus. To acquire a cannabis business license in Oregon, you must be over 21 years of age, and have secured a building for your business, appropriate security for that building, and meet other required measures. Although you can apply for your license before these measures are in place, your application will not be approved until these requirements are finalized.
Why Commercial Lenders are Necessary for Cannabis Business Loans in Oregon
While many states have legalized the sale and use of both recreational and medical marijuana, cannabis is still considered illegal on the federal level. Therefore, banks, which are regulated and backed by the FDIC, cannot provide capital to the operator of a cannabis business. To do so would be considered money laundering.
Since obtaining a loan from a bank isn’t an option, it’s important to find a reputable commercial lender that is experienced in cannabis business loans in Oregon.
When researching cannabis business loans in Oregon, beware of the many predatory lenders that take advantage of cannabis business owners’ need for start-up capital. These unscrupulous businesses have been known to charge interest rates of up to 50 percent on their loans. A reputable lender will require lots of documentation from you to make sure that loaning you money doesn’t present a risk for them. You’ll likely be asked for balance sheets, income statements, and bank statements, along with your credit risk profile and your capital needs.
The Bottom Line: How Much Do You Need to Borrow?
Depending on the type and scale of cannabis business you’re looking to open, startup fees can range from $150,000 to $2 million. Your cost will depend partially on your location, and partially on the type of operation you run. Staffing can make up a huge portion of the startup fees, so if you have a small operation, this cost will be lower. Similarly, rent is another big chunk of capital which can fluctuate depending on your location and circumstances. It’s important to flesh out your business plan, and then find a reputable lender who will help you obtain your cannabis business loan in Oregon.