Arizona Cannabis Loans and Financing Options

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Contributor, Benzinga
February 22, 2023

In November 2020, Proposition 207, officially known as the Smart and Safe Act, passed into law in Arizona, making it the 15th state to legalize marijuana for adult use. Although recreational marijuana is legal in the state, it's still a challenge for cannabis business owners in Arizona to get financing. You likely won't get a business loan from a traditional bank because of federal regulations, but there are some options available if you need access to capital to expand your business. Because there's no one-size-fits-all approach for financing, it's important to understand all available options before you decide on financing. 

Cannabis is legal in Arizona. Anyone over the age of 21 can possess up to an ounce of marijuana. They can legally walk into a dispensary with their ID and cash to purchase it — no prescription or referral is needed. 

Do Arizona Banks Lend Money to Cannabis Companies? 

Traditional banks don’t approve the majority of business loans to begin with, but the odds of financing for cannabis businesses are even lower. Despite many states approving cannabis use, it’s still illegal federally in the United States. Banks and financial institutions must abide by federal law, which makes it difficult for them to lend money to marijuana businesses. Because banks are regulated by the federal government, they are not allowed to engage in these types of transactions and can be subject to fines or even criminal charges if they do.

What Are Some of the Key Factors to Consider When Looking for Cannabis Business Financing in Arizona?

When it comes to securing financing for cannabis businesses in Arizona, there are several key factors that must be taken into consideration. 

An individual or business seeking cannabis business financing should research all potential lenders and investigate each lender’s requirements for loan qualification. Knowing the qualifications necessary before beginning the process can save time and money in the long run. Understanding what kind of financial documents will be required to properly apply for a loan is crucial. The most common documents requested include tax returns, bank statements, proof of income, a business plan and financial projections.

Another important factor to consider when looking for cannabis business financing in Arizona is the cost of borrowing. Because the cannabis industry is relatively new, interest rates and repayment terms can vary widely among lenders. Researching available options and comparing rates is essential to determine which lender offers the lowest cost of borrowing. Investigate possible fees associated with obtaining a loan such as origination fees or application fees because these can significantly affect total costs over time. 

When exploring cannabis business financing opportunities in Arizona it is important to understand local regulations and restrictions. Depending on the specific type of cannabis product being produced or sold, certain licenses may be required from local governments or agencies to legally do business within the state. While some banks may offer loans for businesses operating within Arizona’s regulatory boundaries, some may not provide funds because of their own internal risk-management policies or because they do not wish to violate federal laws regulating marijuana use across state lines. 

5 Types of Cannabis Loans for Arizona Business Owners

Specialized lenders offer five basic types of cannabis loans in Arizona. 

Working Capital

Working capital loans are ideal for businesses that need to secure additional capital for day-to-day operations. These types of loans can help businesses cover the cost of purchasing inventory, pay bills or manage cash flow. Working capital loans have flexible terms and repayment plans, making them an attractive option for businesses in the cannabis industry. 

When it comes to working capital loans, there are two main components: the principal loan amount and the interest rate. The amount of money available will depend on the size of your business and the repayment plan you agree to with your lender. 

AR Lines of Credit

Another type of cannabis loan is an accounts receivable (AR) line of credit (LOC), which is best suited for businesses that are seeking financial assistance during slow periods in sales or when faced with unexpected expenses. An AR LOC acts like a revolving line of credit where businesses can draw upon their eligible receivables, such as invoices they have sent to customers, whenever they need additional funds. When customers pay those invoices, those amounts get credited back against their LOC balance, allowing them to draw down new funds if needed. As with any other type of business loan, borrowers should carefully read through all terms and conditions with lenders before entering into an agreement. 

Equipment Financing

Cannabis equipment financing loans are specifically designed to help businesses in the cannabis industry acquire the necessary equipment for their operations. This type of loan typically has a shorter repayment term than traditional bank loans and is ideal for businesses that need short-term financing. The funds from a cannabis equipment financing loan can be used to purchase anything from computer systems and point-of-sale systems to grow lights and cultivation supplies. 

Commercial Real Estate Investing

Commercial real estate investing for cannabis financing is another way for cannabis companies to obtain needed capital. Through this investment model, investors purchase properties or provide capital in exchange for either equity or debt in the cannabis company. Investors may also provide funding directly to the commercial real estate owner as a bridge loan or hard money loan. This investment option allows businesses to access funds without having to take on additional debt or give up ownership in their business. 

Real estate investments offer investors more security than other forms of investing because they are secured by physical assets such as land, buildings and other physical property. For example, if the tenant defaults on their lease payments, the investor will still receive rental income from other tenants until the matter is resolved. 

Cannabis companies may also use commercial real estate investments as a source of long-term capital to fund expansion projects and acquisitions. By investing in an undervalued building or property with the potential for higher value appreciation, businesses can leverage these assets for greater returns over time. 

Cannabis Dispensary Loans

Cannabis dispensary loans are a type of financing specifically designed to help cannabis businesses fund their operations. This type of loan is becoming increasingly popular as the marijuana industry continues to grow and evolve. 

This specialty loan is available to marijuana-related businesses, such as dispensaries, cultivators, processors and manufacturers who are in need of funds for various business activities, including purchasing supplies, hiring employees or expanding operations. 

Generally, cannabis dispensary loans are short-term options that can range from $50,000 to $1 million. Depending on the lender’s qualifications and criteria for approval, the amount of money lent can be higher than this range. The majority of cannabis dispensary loans have repayment periods ranging from two months up to 36 months. 

Benefits of Expanding Your Arizona Cannabis Business

Marijuana sales soared in 2021, just one year after it became legal for recreational use. Arizona is second in sales only to California. Demand for the product is huge, making it the prime time to scale your cannabis business. As an established business, you’re already a trusted name in the industry. Expanding into new markets can help you tap into new customer bases and increase your overall revenue. 

A Specialized Lender for Reliable Business Growth

A business loan from a specialized cannabis lender gives you the opportunity to obtain the financing you need to expand your business and the assurance they know the industry inside and out. You won’t have to worry about being taken advantage of or navigating the legal red tape. These experts can guide you through the entire process and explore the various options to help you grow

Frequently Asked Questions


What do you need to do to get a marijuana business loan in Arizona?


To get a marijuana business loan in Arizona, you need to start by understanding the state laws and regulations. The first step is to research the Arizona Department of Health Services website. It contains information on what type of license you need to open a marijuana dispensary, how much it costs and the application process. Then you will need to apply for an operational permit from the Arizona Department of Health Services, which includes completing an application and submitting it with your supporting documents.


How much does it cost to open a dispensary in Arizona?


The cost for opening a dispensary in Arizona can vary depending on several factors such as the size of the dispensary, the location of the building and other requirements from local authorities. Generally speaking, there are three main types of license fees that applicants must pay: an application fee ($5,500), an annual registration fee ($1,000) and a one-time permit fee (varies). Along with these fees, you may also have additional costs such as construction expenses or professional services like legal fees or consulting fees.


Is it hard to open a dispensary in Arizona?


Opening a dispensary in Arizona isn’t necessarily hard, but it will require meeting stringent regulations set by the state government. You must be able to prove that you meet all relevant qualifications, including having sufficient capital or financial resources to sustain your business operations.