It is not, and has never been, enough to have that one killer concept: Million-dollar ideas cost millions, even billions to start. But surely, it’s not that hard to get funding for a tested, proven moneymaker, right? Let’s look at this conversation between Willie the Farmer and Mr. Banker:
WtF: “Well hello, Mr. Banker, sir. I’d like to see about getting a loan for this here new startup…?”
MB: “But of course! Nature of business?”
WtF: “Cannabis Fa—”
MB: “Get out”
That’s how most of these conversations go. Sales from recreational and medical marijuana in the US now rival Taco Bell’s annual revenue and is projected to surpass the $15 billion revenue generated by the NFL by 2020 (read here)! And that’s mostly just from straight use; we haven’t even scratched the surface of the possibilities: bud and breakfasts, competitive sporting events (admit it, you’d watch that), heck even theme parks! That doesn’t matter to Mr. Banker and most of the usual places you’d expect to get capital funding from, though. So how exactly do we get marijuana business capital to build Hashneyland?
Getting by with a Little Help from Your Friends
The easiest way to get funding for use as marijuana business capital, is to “get your father to give you a small loan of a million dollars”. The next best thing is to get your buddies together, form a circle and talk business.
Equity financing allows you to get an investor or small group of investors to directly provide capital in exchange for part-ownership in the business. The best part is that depending on how close you are to your investors and how good your negotiation skills are, you’ll likely end up with smaller overall interest rates than traditional loans and never need to worry about fixed regular payments that you’ll need to set aside that could possibly eat into the relatively meager initial earnings of your business. The bad part is that you’re giving up full control of your business this early on and you could strain your relationship with these people, if that kind of thing is important to you (Movie Mark Zuckerberg is waving at you).
If that’s something you’d rather not deal with while you’re still just starting, here’re a few other spins on the concept:
- Private Equity Firms – similar to what we talked about earlier, except you’re going to be dealing with people you probably won’t mind not being on speaking terms with after. The trade-off is that most of these are going to be short-term, high interest loans OR large stakes in your company (they are a group, after all), BUT these will be people that have experience with marijuana business capital funding and could get you in touch with other people in the industry. A Hashneyland crossover with WtF’s Bud and Breakfast sounds good, right? The BEST thing, though, is that there are quite a number of these if you know where to look. Check out a few samples here, here and here.
- Venture Capitalists – these are your more traditional investors always on the lookout for the next big thing. These are bound to be pros in the biz you can pick a trick or two from in running a good business, but excellent negotiating skills coupled with a keen eye are a must or you might just end up signing over more than you were initially willing to give.
- Crowdfunding – the SEC allows anyone to invest in small companies for business stake for up to $2,000. Instead of straight out control or equity, though, you can offer “gifts” per amount tier invested. You can even set stretch goals according to the amount of total funding you’ll be receiving, i.e. the roller coasters in Hashneyland get 3 loops if and only if total funding reaches $750,000, in case we only get $700,000 then we only get 2 loops. Of course, you can’t just go to Kickstarter or Patreon to do this because of certain laws, but there are the more niche ones like Fundable, Fundanna and Cannafundr.
- Angel Investors – they’re like Venture Capitalists; always looking for the next big thing to invest in, but will more or less just give you marijuana business capital and be content with eventual earnings or the “Shroomie McPottie Memorial Wing” in Hashneyland.
Dude, Where’s My Car?
Of course, just because you can’t take out a bank loan specifically for marijuana business capital doesn’t mean you can’t rely on the more traditional loan channels, these are also the types of loans you’ll be taking out in case you decide to go with Private Equity Firms.
- Private Loans – the usual source of marijuana business capital funding. You can take out quick personal loans using your car, house or any other property as collateral, although these will also usually be subject to higher interest rates than business loans.
- Real Estate Loans – obviously you’ll need to run your business from somewhere so you can use this to buy or refinance buildings or raw land
- Equipment Loans – so instead of the car you’re using as collateral, you can take out a loan for a car or any machines you’ll be needing for your business
- Cash Advances – when all else fails, you can always take out a cash advance, either from firms or from your trusty credit card. This is, of course, a last resort since Cash Advances are typically associated with exorbitant interest rates. If you need things quick and easy, though, this is your best option.
Honesty is the Best Policy
What you should never do, though, is outright lie or attempt to about the purpose of your loan (like taking out a car loan and instead using it to directly serve as your marijuana business capital). You will get caught. Especially during these early stages of the cannabis industry. Best case scenario you get blacklisted, worse case you get jail time, worst case it reflects poorly on the marijuana business community. Either way: Hashneyland is kaput.
As we’ve discussed, there are many ways to break in the biz if you need marijuana business capital while staying completely honest. There are more, of course, and if you’re interested in staying on top of the news, connecting with other people in the business or are even looking for inspiration for that next million/billion-dollar idea, do consider registering with us or subscribing to our newsletter.