Working Capital Funding for Cannabis Businesses

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Contributor, Benzinga
January 3, 2023

Like any other industry, the cannabis market is expanding, and brands need financial solutions to support their expansion plans. The majority of traditional lenders avoid the cannabis market because of ongoing federal laws and regulations. Fortunately, cannabis owners can turn to alternative lenders and financing solutions for their growing business needs. One option to consider is working capital funding.

What is Working Capital Funding?

Working capital loans enable businesses to make the required purchases, ensuring that the cannabis products that customers want are always available on the sales shelves.

How Does Working Capital Funding Work?

In exchange for a portion of your daily sales, or your monthly revenue, you receive cash advances with working capital funding. Even with a low credit score, working capital can be a quick and simple way to get a cash advance for a cannabis business without the need for collateral. 

Calculate the Expense Gap

Where you are and where you want to be are separated by a financial gap. Calculate how much it’ll cost to address operational weaknesses and create a plan for necessary upgrades to get  there. Working capital can be used for a variety of different things like introducing a new product, acquiring commercial real estate, or upgrading your facility.

Uncover possible collateral 

Not all financing options require collateral, but if you have it, you may have access to more funding. Established companies can obtain debt capital by leveraging various asset classes and sales. Interest in the business, equipment, intellectual property or patents and real estate are some examples of collateral that can be used to secure a cannabis loan. Cash flow is typically the most important factor to a lender. 

Determine How Quickly Financing Can be Obtained

Funds from cannabis loans are usually available within days of approval. You can expedite the process by ensuring you have all necessary documentation on hand, such as financial statements, inventory lists, appraisals and six months’ worth of license bank statements. CBR is one of the only lenders in the cannabis industry to provide fully uncollateralized working capital financing to licensed operators and ancillary companies. These cannabis business financings are term funding’s that are customized to the needs of the borrower.

Explore Various Financing Options 

When it comes to working capital funding, there are numerous products. One or a combination of funding might work best for your business needs.

Prepare to Pay Off the Loan Quickly

These loans typically have higher interest rates than traditional business loans because of the risk involved, so you’ll want to have a plan for how you’ll quickly repay the loan. 

4 Types of Working Capital Funding

Different types of working capital options include:

  • Working capital loans: These loans or advances have both secured and unsecured options. 
  • Lines of credit: In contrast to a conventional business loan, you have the option of borrowing up to a predetermined amount (your line of credit) and paying interest only on the amount you actually use.
  • Invoice financing: A type of loan known as invoice financing allows for partial repayment of unpaid invoices. Because of its flexibility and reliable cash flow, invoice financing is a popular choice among growers, distributors, manufacturers, cannabis brands and ancillary businesses.
  • Purchase-order financing: When you don't have the money on hand, you can use cannabis purchase-order financing to have the money to pay for your orders.

Important Working Capital Funding Considerations 

The credit limit granted to a small cannabis business will, like any loan, be based on your capital requirements and credit profile, which will be determined by the submission of recent financial records such as balance sheets, income statements and bank statements, your credit score and management personnel information. There are some things you’ll want to consider before applying for a working capital loan. 

Expect to Pay a Premium  

Keep in mind the interest rates are going to be higher than other loan options. They may also have faculty fees and other associated borrowing costs.  

Compare Products 

It is worthwhile to review pricing with various potential lenders. It's crucial to remember that equity issuances and offerings of convertible securities continue to be essential for the industry's capital-raising activities.

Prepare for the Unexpected

Although the goal is for your business to succeed, have a plan in place for the unexpected. Consider how you’ll repay the debt if there’s an unexpected crisis or issue. It’s important to note,  cannabis businesses typically don’t have federal bankruptcy protection. 

Understand the Risk

If you take on secured debt, it is your responsibility to realize that your lender has a claim against your collateral that supersedes all other claims.

Help for Short-Term Gaps

One of the most challenging aspects of managing a cannabis business is the financial side. It can be difficult to decide whether to take on debt or give away equity in your company in order to reach your goals. Working capital financing can be the ideal solution to occasional cash-flow gaps or business expansion.

Frequently Asked Questions


What is funded working capital?


Funded working capital is when a company borrows money to pay for ongoing operations and payroll expenses.


Can you get a loan for working capital?


Cannabis working-capital loans are available to business owners who meet the lender’s specific requirements.


Are there other types of working-capital funding besides loans?


There are several types of working-capital funding options besides loans, including lines of credit and purchase-order financing.