The Ultimate Guide to Cannabis Equipment Financing
Cannabis is an emerging industry that’s poised for significant growth. Many entrepreneurs plan new businesses in this space, focusing on farming, laboratory research, and dispensing, among other sectors. Regardless of which market niche is your priority, the right equipment can raise your productivity and sales. There are various ways to buy and pay for the equipment you need to boost your business. This article will explore cannabis equipment financing guide to help you find the perfect fit when it comes to buying the things you need to take your cannabis business to the next level.
Determine Your Cannabis Equipment Needs
Whether your purpose for this year and beyond is to begin a new business or expand your existing cannabis sales, there are several ways to get the essential equipment you need. First, consider if new or used equipment is preferable in your case. Obviously, new equipment comes with peak performance and the latest features. But, there are deals to be had on older, easily used equipment. Many companies specialize in selling used cannabis business equipment that they fix up and give warranties. If you don’t need something new and shiny with all the bells and whistles, choosing used might be an effective way to save your business some money.
Next, determine if buying, leasing, or financing your equipment will work best for your company. Leasing is perfect for items that need to be replaced often. Buying can be better for something you intend to use long-term. But just because you have the cash to purchase something outright doesn’t mean you should. That money may be better spent elsewhere, depending on your business goals. Business loans enable you to pay off equipment little by little with a low-interest rate. Refinancing existing equipment loans and Pivot finance can offer you access to cash when you need it. Depending on market conditions, it can also result in lower loan rates and better terms.
How Does Cannabis Equipment Financing Work?
If you decide to move forward with a loan, you’ll need to choose one with a variable or fixed rate. Variable-rate loans can be a suitable match for entrepreneurs with higher risk tolerance. Fixed-rate loans deliver stability, but monthly interest payments are usually higher. Monthly payments are usually lower, though rates may jump significantly at the end of the loan term. Shop around because some cannabis financing options can offer attractive bonuses like no prepayment penalties and delayed payment for more than a year.
What Are the Financing Rates for Cannabis Equipment?
Cannabis business equipment loans and leases will experience higher interest rates than equipment financing for a more conventional business. For example, traditional equipment loans usually charge about 5-8% interest depending on market rates, down payment amount, and the borrower’s credit history. Because the Cannabis industry is riskier, rates generally range around 8-25%. Since most cannabis financiers are alternative lenders, little regulation and rates can differ widely.
Financing Options for Cannabis Equipment Loans
Because of strict federal rules, obtaining traditional small business loans for cannabis equipment financing from large national banks is essentially impossible. The cannabis business will also probably appear on the restricted industry lists of many online lenders. You also may not obtain business credit cards from these sources. However, private lenders, credit unions, and venture capital investors that function on a regional basis may be willing to loan you capital in areas where cannabis is legal. Specialty finance options and cannabis loans exist that concentrate on the marijuana industry.
You can also qualify for SR&ED credits if you are focused on creating or improving materials, products, or processes, and they are performed systematically with supporting documentation. Instead of letting the credit go to waste, you can recover some of your investments.