With the legalization of cannabis in Colorado for both medicinal and recreational use, there is plenty of opportunity for cannabis business owners in the Centennial State. Although cannabis is legal in Colorado on the state level, it remains a Schedule I controlled substance and is illegal at the federal level. What does that mean for business owners? It means that finding Colorado cannabis business loans isn’t as easy as walking into your local bank. Fortunately, there are commercial lenders that can help. Here’s what to know about getting a Colorado cannabis business loan.  

Where Can I Find a Loan?

Because cannabis remains illegal at the federal level, its legal status at the state level won’t help you find a loan. Most traditional financial institutions, including banks, credit unions, and credit card companies are unable and unwilling to work with cannabis businesses because handling money associated with these businesses is illegal at the federal level. It’s estimated that about 35 credit unions exist in Colorado that are willing to work with cannabis businesses, but these credit unions operate anonymously and do not publicize their willingness to work with cannabis businesses. Even if you happen to find a place that is willing to allow you to store your money, these institutions are not providing loans or financing to cannabis businesses in Colorado.  However, the cannabis business is booming in the state thanks to a number of businesses that have begun providing financing for cannabis-related businesses, including hedge funds and investors specifically focusing on cannabis financing. While you likely won’t have any luck applying for a loan at the bank down the street, there are commercial lenders that specialize in financing cannabis businesses and are able to help.

What Precautions Should I Take?

Unfortunately, the limited options for cannabis business financing means that business owners sometimes find themselves struggling to come up with cash. Predatory lenders have recognized the opportunity and started springing up all over Colorado, waiting to take advantage of business owners who need cash to keep their businesses afloat. Interest rates charged by these lenders sometimes average 40 to 50 percent, and desperate business owners are willing to pay because they feel like they have no other options. Cannabis businesses in Colorado cannot accept credit cards because financial institutions, including credit card companies, cannot handle money associated with the business, which obviously creates a challenge. Scam artists have seized on the opportunity to offer hope to business owners, pretending to offer a “legitimate” way to use credit card sales in their business. Unfortunately, there’s no such thing. With all this in mind, it pays to be cautious when you’re exploring Colorado cannabis business loans. One of the easiest ways to determine if a lender is predatory or a scammer is to ask what paperwork is required in order to receive financing. Legitimate lenders will require extensive documentation, including your credit report, background checks on you and your employees, financial reports, banking statements and more, while the predators will likely require very little documentation.  

Do I Need a Cannabis Business License to Operate in Colorado?

All cannabis business owners are required to hold licenses in order to operate in the state of Colorado. The Colorado State Licensing Authority offers six different types of licenses for retail marijuana businesses and also offers licenses for medical marijuana and industrial hemp certification. Applicants and their financial partners and employees must be at least 21 years of age and have lived in the state of Colorado for at least two years prior to application. 

The good news is that states like Colorado, which legalized cannabis use relatively early compared to other states, have many successful cannabis business owners who have managed to obtain legitimate financing. There are plenty of options for Colorado cannabis business loans when you work with a commercial lender focused on cannabis businesses who understands all of the regulations associated with the industry.