What Options Are there for Cannabis Business Loans in Colorado?

As one of the first states to legalize the recreational use of cannabis, Colorado has been at the forefront of the emerging cannabis market. It’s estimated that Colorado’s cannabis industry sales have exceeded $6 billion since recreational use was legalized, and growth has been steadily climbing the last few years, showing no signs of slowing down. 

In short, it’s a great time to get into the cannabis business in Colorado. If you’ve been considering stepping foot in this emerging industry, here are some things you should know:

You Won’t Be Able to Obtain a Traditional Bank Loan

Since cannabis is still illegal on the federal level, traditional banks are unable to provide loans to cannabis businesses. While there are rumors that some credit unions are willing to work with cannabis businesses, these entities don’t publicize that willingness and are pretty difficult to track down. Also, while you may be able to open an account for your cannabis business at a credit union, they do not provide loans and financing.

Your best bet for cannabis business loans in Colorado is a commercial lender. Commercial lenders offer the most hassle-free financing options for starting a Colorado cannabis business. 

When researching commercial lenders to finance your business, beware of predatory lenders. These entities know that obtaining financing for a cannabis business is difficult, and as a result they can prey on businesses in need of fast financing, often charging interest rates of up to 50%, as opposed to single-digit interest rates from reputable commercial lenders. A legitimate commercial lender will require lots of documentation from you to determine your credit-worthiness and mitigate their own risk in financing your loan. If a lender fails to ask for this information, they are likely planning to take advantage of you, and it’s best to stay away.

While your options to obtain cannabis business loans in Colorado may be limited, a reputable commercial lender will help get your business financed and become a great ally while you build your cannabis business in Colorado.

You’ll Need a Business License

Once you’ve ironed out your financing, your next step is to apply for a business license. Colorado offers several types of cannabis business licenses, which vary based on whether you’re applying for a retail (recreational) marijuana business, or a medical marijuana business. The requirements to apply for a cannabis business license in Colorado are:

  • You must have lived in Colorado for at least 2 years
  • All business partners and employees must be 21 or older and satisfy the same residency requirement
  • No business associates can have a conviction for controlled substances within the past 10 years (you stand a better chance of obtaining your license if everyone has a clean record, period.)

The base price for a business license is $4,000, and there will be state and local fees on top of that. You’ll need to make sure that the county you intend to operate your business in allows cannabis business – while it’s legal on the state level, counties are able to opt-out, and some prohibit the growth, sale, and use of cannabis entirely. Unless you’re experienced in researching laws, regulations, and tax issues, it helps to have competent legal counsel to help you navigate the legalities of operating a cannabis business in Colorado. Obtaining cannabis business loans in Colorado allows business owners the financial freedom to perform this type of due diligence and ensure the greatest success for their business. 

Starting a Colorado cannabis business can be a promising endeavor, but as with any business, your greatest chances of success will be found with the right preparation. The first step should be obtaining a Colorado cannabis business loan so that you’re able to support the financing of obtaining your business license, hiring a business attorney, and focusing on marketing, hiring of staff, and other business startup expenses.