CBD Business Loans 101: Funding Your Dream Business

woman researching cbd business loans

Looking to find out more about CBD business loans? Perhaps we can help. Our advice is largely self-taught. Always seek professional advice be it financial, legal, or any other sector. The wellness industry has been flourishing these past few years, with the CBD sector holding the spotlight as more and more people have started using CBD products and their feedback is mostly positive.

As a non-psychoactive ingredient of cannabis, CBD's mind and body benefits are generous.

This is why opening a cannabis business is now more appealing than ever. And while demand is on the rise, a steady flow of entrepreneurs feel attracted by the opportunities that a CBD business can bring to the table.

However, starting a business requires having quite a generous working capital, and that’s something few launching businesses actually have. So what’s left to do?

A typical aspiring entrepreneur looking to start a cannabis business without personal capital will need to apply for a hemp business loan. So, is a CBD loan any different than a traditional business loan? And more importantly, which are the banks that accept CBD businesses?

In this article, we’ll talk about CBD business loans, how you can get them, and what they’re all about.

While CBD may still be blanketed by a veil of misinformation, information regarding hemp business loans is even more inaccessible. Our aim is to bring valuable information to the table to help any aspiring CBD entrepreneur take the next important step in their business. So let’s dig in!

What Is a CBD Loan?

A CBD loan is a type of loan specially designed for CBD businesses. Unfortunately, getting approved for it is not easy due to several legal reasons. However, it’s time to clear the haze surrounding CBD business loans and shed some light on the main information relating to them.

In 2018, hemp and hemp-derived products were federally legalized. It was the enactment of the Farm Bill that took things to the next level, increasing demand for CBD products.

Up until that point, it was strictly illegal for federally-insured institutions to give out loans to CBD sellers because the Controlled Substances Act did not make any difference between THC and CBD, the two most famous cannabis active components.

Wondering what’s the main difference between them? THC brings the cannabis user that famous ‘high’ that alters consciousness, while broad-spectrum CBD doesn’t.

How Do I Get Funding For My CBD Business?

Although much has changed since the Farm Bill was enacted, institutions still don’t have enough experience lending to CBD entrepreneurs. The issues stem from a lack of predictability and stability. Since the rise of CBD is relatively new on the wellbeing market, this phenomenon is relatively understandable.

CBD business loans, however, have not been necessarily following the same growth trends — but times are showing signs of change. There are a few complexities that some lending institutions are savvy and confident enough to deal with, while others just shy away.

But don’t despair. CBD loans can still be accessed.

To get you going, you will definitely need a business plan. This is the starting point for any company as it helps business owners build trust in the eyes of reputable lending institutions, and the best means to get the much-coveted CBD business loans.

Going forward, we’ll look at all the loan types that are available for your CBD business but also at the banks that accept lending to a CBD business. Hopefully, you will get a clearer idea of what you need the money for. A lending institution will always need a certain degree of clarity when it comes to lending you a considerable amount of money since it contributes to your credibility.

Equipment Loans

team looking at banks that accept cbd business

In the case of an equipment loan, the equipment itself will be used as collateral for the loan. If you’re looking to start a CBD business as a producer, most lenders understand this and are willing to issue a loan for CBD business owners to pay for machines that can harvest and extract the hemp flower.

This is applicable for outdoor hemp growers. For indoor growers, other types of equipment will be necessary. Think something along the lines of inline fans, grow lights, and other hydroponic supplies you may need.

Of course, as soon as you have paid the loan, the equipment is 100% yours. However, as in this case the equipment was used as collateral, if you default, you won't get to keep any of it.

Merchant Cash Advances

A merchant cash advance is more similar to a traditional business loan in that it’s created to infuse a business owner with a short-term supply of money. This is ideal for a business owner that wants to go into the CBD business but has no history in the business sector per se. As you can see, not all CBD business loans are prohibitive.

This advance needs to be paid back by the CBD business owner by sending the lender a percentage of the sales cashed in periodically. The other way to repay this advance is to send the lender a fixed fee regularly.

Line Of Credit

This option is very similar to a business credit card in what it can do for you. A line of credit will allow you to keep borrowing money up to a limit, of course, and then will replenish itself as you keep paying back. Like this, you’ll be able to draw money from it continuously.

A line of credit allows you to only borrow a limited amount of money, the money you actually need, and still have a reserve to fall back on in case of an emergency. The range of CBD business loans is rich and versatile, so anyone eventually finds something to choose from.

What you must know about lines of credit is that obtaining one can be difficult. In fact, it can be even more difficult than obtaining a traditional business loan. If you have had your CBD business for at least 6 months, then you’re more likely to qualify for such a loan.

Term Loan

If the plans you have for your CBD business are more ambitious and you’d like to either significantly expand your operations or engage in projects that require considerable infusions of money, then a term loan might be the better option for you.

A term loan is quite different from the alternative loan options discussed above as it is more similar to traditional loaning. However, as we all know, it’s more difficult to obtain a traditional type of loan from financial institutions than the more alternative CBD business loans.

Most CBD businesses may have to look for alternative funding options, and in this case, lenders may be more inclined to give out short-term loans instead of long-term ones.

CBD business owners need to know about all these cannabis businesses loan options, not only before starting but also for developing their business.

Before starting their CBD business or any type of business for that matter any entrepreneur needs to get very well organized and understand what the needs of the business are, how they can be fulfilled, and what sort of timeline they’re looking at.

What Banks Accept CBD Businesses?

Traditional banks may still shy away from handing out CBD business loans to budding entrepreneurs. This is because CBD’s formerly stigmatized history still weighs heavier than its currently impeccable setting. Some time needs to pass for CBD to gain more credibility, not only at a consumer level but also on a larger scale encompassing financial institutions.

We’re not saying there isn’t any chance to get a CBD loan with a bank. On the contrary, we advise you to seek them out, especially if you know them to support the world’s current trends.

But if you think that even opening up the topic of cannabis financing may unbalance your business relationship, then refrain from broaching the subject altogether and seek out alternative lending options for your CBD business loans needs.

Seek Out Alternative Cannabis Lenders

Since cannabis products demand is so high worldwide now, it should come as no surprise to find many companies looking to specifically fund CBD businesses and offer cannabis startup loans.

You may find that many of them specialize in recreational marijuana, but this shouldn’t stop them from considering a collaboration with you as well.

A simple search online will return many good results, and an appointment with a cannabis lender is only a phone call away. It never hurts to try. You never know who ends up funding the business of your dreams.

Crowdfunded Loans

Since we live in the age of the internet, anything is possible. As you may already know, plenty of businesses got off to a good start after having had their initial funding come from crowdfunding sources. If the public loves what you are willing to offer, then it’s willing to pitch in and support your dream right into fulfillment by offering you CBD business loans.

This type of loan is called debt crowdfunding or peer-to-peer lending (P2P). When all is said and done, you will need to pay back these investors with interest.

Is a CBD Business Profitable?

CBD products now come in a variety of shapes and sizes to accommodate all needs and preferences. Since the demand for CBD is now higher than ever, the CBD industry has adapted by creating a wide variety of products.

As you can see from our own offer here, at Opulent Organics, our line of products include:

CBD Oil Drops

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Gluten-Free CBD Gummies

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CBD Capsules

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CBD Capsules for Sleep

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CBD Topical Salve for Muscle Relief

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CBD for Energy and Focus Packets

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CBD products are very versatile and can satisfy any budget out there. These aspects can create great advantages for business owners, offering them the opportunity to solidify their position on the market. This also makes applying for CBD business loans all the more worth it.

What’s more, CBD is known for the tremendous benefits it brings to both the human mind and body. It has a relaxing effect on the mind while also soothing the muscles and improving sleep quality.

The CBD industry is just budding, and it’s exactly for this reason that business owners can rejoice in the benefits of a young industry. It’s a fresh market, where competition is still timid, allowing for plenty of space for anyone looking to provide the world with CBD products.

The Takeaway

When it comes to CBD business loans, the cannabis industry is very permissive in that it offers equal opportunities to everyone out there. In other words, even if you’re less experienced as a business owner or have less capital to work with, you can still build your business by getting cannabis funding.

There are, of course, some requirements you’ll need to meet, but there's no better time than now to finally start that CBD business you’ve been dreaming of.

If you’re an aspiring CBD business owner and have any questions at all regarding your business prospects, we’re here to help.

We offer premium CBD wholesale discounts that can fit all your needs across the nation, including California, Oregon, North Carolina, Florida, and many more. So contact us, and together we may establish the foundation from which your CBD business will relentlessly flourish.

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