Who should get a California cannabis business loans?

The world is changing, and with it, business is changing. There are new, emerging markets that were barely on the radar even a few years ago, but now are poised to be the next big industries. One of those markets is the cannabis business. 

If you’re reading this, you’re likely considering stepping your feet into this new and exciting venture. It’s a great time to join this evolving industry, but here are some specifics that California residents should be aware of before getting started. Of course, one of the most important considerations when starting a business is how you’ll fund it – read on for some helpful tips about California cannabis business loans.

What to Know About Obtaining a California Cannabis Business Loan

While many states have legalized cannabis, it is still illegal on the federal level, so most banks, credit unions, and credit card companies don’t provide lending or banking services to cannabis businesses. This can make it hard for a new business to obtain funding, unless you have private financial backing, which isn’t widely available. 

Fortunately, commercial lenders aren’t bound by the same laws as FDIC-backed banks, and therefore they can provide financing for California cannabis businesses while ensuring your loan and business comply with state and federal regulations.

Commercial lenders provide a great option for California cannabis business loans – but not all lenders are created equal. Beware of predatory lenders – they prey on business owners in need of cash quickly, and charge astronomical interest rates on their loans that can make it very difficult to turn a profit and repay the loan. 

The biggest warning sign that your lender may be predatory is that they don’t require enough documentation. Legitimate lenders will want to make sure that your business doesn’t provide a risk to theirs; the more documentation they ask for, the greater chance they are a legitimate lender. Legitimate lenders will likely require:

  • a background check for everyone in the company
  • banking statements
  • a credit check
  • financial reports 

Obtaining a License for Your California Cannabis Business

In addition to obtaining financing, you’ll also need a business license to operate your California cannabis business. In California, licenses are issued by 3 different licensing authorities. Where you obtain your business license will depend on the type of license being issued.

  1. Bureau of Cannabis Control – this entity issues commercial licenses to retailers, distributors, testing labs, microbusinesses, and temporary cannabis events for medical and adult use
  2. California Department of Food and Agriculture’s CalCannabis Cultivation Licensing – provides licensing specifically for cultivators of medicinal and adult-use cannabis
  3. California Department of Public Health’s Manufactured Cannabis Safety Branch – this entity focuses on cannabis-infused edibles for medical and recreational use, and licenses the manufacturers of these products

Once you determine the type of license you’ll need and where to obtain it, you’re in great shape. You have to be over 21 years old to obtain a cannabis business license, but you do not need to be a resident of California. And while having a criminal record won’t necessarily make it impossible to obtain your business license, your chances of being approved are much better without one. Finally, you’ll need to know the local and state regulations that are applicable to your business – and you’ll need to prove to your issuing entity that you know your stuff. 

To ensure that you have your ducks in a row and to give yourself the best chance of being approved for your business license, you’ll want to have a team in place prior to applying – and for that you’ll need capital. Obtaining a California cannabis business loan from a reputable commercial lender is an important first step towards getting your business up and running – quite possibly the most important step of all.