In terms of total cost, while no two dispensaries are created equal, you’re probably not going to be able to realistically make a go of things in any location with less than $150k, and in states with extensive capital requirements you could easily need upwards of $2m or more.
Now that we have some ballpark cost figures in hand, we’re going to discuss a few potential ways you can raise the capital to cover them:
Probably the most popular option for entrepreneurs in any industry. Especially important in the cannabis industry, due to difficulty of securing financing from traditional channels.
Another popular option for entrepreneurs in all industries, but again even more popular in canna-business. When banks won’t easily lend, funds have to be raised somewhere.
Until cannabis banking reform passes, no major U.S. bank will loan money to fund a dispensary. But it is now possible to get a loan through a credit union or cannabis-specific bank. In Canada, traditional banks such as BMO and TD will issue a bank loan for a dispensary, and cannabis entrepreneurs are now eligible for funding from the Business Development Bank of Canada.
With no shortage of people looking to break into the cannabis industry, there are likely several potentially compatible parties that may be interested in developing a partnership. Not only is this a great potential source of investment capital, but their skillsets can often supplement yours as well.
In the private market, there are investors eagerly looking to support marijuana-specific businesses and operations. This group is only expected to grow as legalization takes hold across the states. While these types of investors make finding funding more feasible, understand that these financiers often lend at higher interest rates, for short-term periods, and sometimes come under the condition of “convertible debt,” where the lender can convert a loan into an equity stake in the company.
Check out companies like:
Getting in touch with a capital broker specializing in the cannabis industry is another fantastic way to find investors. It’s their job to locate and qualify potential investors from all over the world who are looking to invest in marijuana.
Securing funding for a marijuana dispensary was initially harder than raising funds for nearly any other traditional type of business, but the past few years have demonstrated the potential for profit, and changed the minds of many investors and financial institutions. The COVID-19 pandemic has only accelerated the shift in confidence, with cannabis businesses being deemed essential, and the industry showing resilience in the face of recession. It’s inspiring many investors to adjust their policies and get into the game. However, you need to realize that money comes at a cost, which very often ends up being an ownership stake.
Watch for even more changes over the next several years, including the potential entrance of major financial institutions into the market, once some of the legal questions hanging over the industry have been adequately resolved.
Read more about some innovative funding solutions here.