CBD loan: Why would I need one?

cbd loan

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The Agriculture Improvement Act of 2019, better known as the “2018 Farm Bill,” legalized the cultivation of hemp and declassified hemp as a Schedule I controlled substance.  The passing of this landmark piece of legislation means that opportunities for CBD business owners have greatly expanded in the United States, leading some would-be entrepreneurs thinking about starting their own businesses. While CBD business owners do not face all of the same legal and financing hurdles as cannabis business owners, it can still sometimes be challenging to find a lender that understands the CBD industry, and allternative lenders may be required in order to provide the financing you need. When considering CBD loans, you’ll quickly discover that there are advantages to pursuing industry-specific financing.

Challenges Facing Business Owners

While some states may offer the option to work with traditional financial institutions in some states, the banks and credit unions don’t have an in-depth understanding of the unique financing needs of CBD businesses. CBD businesses often struggle with long cashflow collection cycles, irregular collections on invoices, a lack of viable lenders and dilutive equity capital raises, which makes obtaining financing extremely important. Loan products offered by traditional financial institutions may not be equipped to address these unique needs. Commercial lenders that work with businesses in the CBD industry have designed and customized their loan products to suit the needs of CBD businesses.

Loan Availability

CBD business owners have more options than cannabis business owners when it comes to financing, as cannabis businesses cannot receive loans from traditional financial institutions due to the classification of cannabis as a Schedule I controlled substance. However, CBD products are derived from hemp and still occupy a legal “grey area” because states, counties, and municipalities have conflicting regulations regarding its cultivation and distribution despite legality at the federal level.  The federal government does continue to regulate the sale of CBD products and prohibits the addition of CBD to food and drinks. Due to the many conflicting and confusing regulations, traditional financial institutions like banks and credit unions are often unwilling to work with CBD business owners. Commercial lenders that work specifically with businesses in the CBD industry have a better understanding of the rules and regulations surrounding the industry and are better equipped to address the financing needs of these businesses.

Loan Types

When pursuing a CBD loan, you’ll discover that most loans fall into one of two categories: debt funding and equity funding. Debt funding is used by both individuals and businesses and includes options like taking out a personal loan, using a credit card, or taking on a mortgage. The loan is paid back in regular installments with interest. Businesses can opt to use equity funding when they already hold value. When using equity financing, the business owner offers shares of the company in exchange for financing. The loan is repaid in the form of dividends from the company or profit when the company is sold. Common types of loans found within the two categories include private loans, real estate loans, equipment leasing loans, and dispensary cash advances.You financing needs, such as purchasing new equipment, obtaining real estate, funding inventory gaps, or marketing your business, will help dictate the type of loan that you choose.  A commercial CBD lender will be able to help you compare the types of loans available to your business and choose the best option for you.

It costs money to start a business, money to help a business grow, and money to keep it afloat during slow seasons or between invoice payments. CBD loans from commercial lenders are uniquely suited to meet the needs of CBD business owners and help these businesses navigate the rules and regulations surrounding the industry.


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