Since it was legalized in 2019, many parts of Canada have seen a steady climb in cannabis consumption, particularly among younger generations (ages 15 – 34). Although legal marijuana is less popular in some areas, our more populated regions have seen an influx of shops selling cannabis products and accessories as a result.
Cannabis Shop Expenses That a Business Loan Help Cover
If you’re a budding entrepreneur, one of the first things to consider is how you’ll be paying for your upcoming expenses. After all, growing a business takes a lot of time, effort and money to see a real return on your investment and you may not have the appropriate funds in your own bank account yet.
Luckily, a business loan is a lump sum of money that you can borrow from a physical or online lender, then repay through divided installments over a set term. Because the financing is liquid cash (usually deposited directly into your business bank account), you can use it to cover almost any expense your cannabis store racks up, such as:
- Leasing or purchasing property (buildings, land, etc.)
- Renting or buying equipment (cash registers, card readers, etc.)
- Interior or exterior furnishings (display cases, shelving, etc.)
- Filling your inventory (dried goods, consumables, etc.)
- Paying your utilities (grow operations use up a lot of resources)
- Getting proper legal advertising (signage, permits, etc.)
- Building and maintaining a grow house
Although it can be tempting to go over budget and buy unnecessary things, remember that a business loan is a serious debt that you must repay over time. Only spend your borrowed money on expenses that will truly benefit your cannabis store.
Business Financing For Any Industry
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Where Can You Get a Business Loan to Fund Your Cannabis Store?
Depending on where you live, there may be certain government restrictions that prevent you from starting your own cannabis store or grow house (only government institutions are allowed). If you’re in an area where private cannabis dispensaries are legal, there are several funding sources that you can apply with, such as:
Banks
- Are often a preferred choice for financing because they can offer larger business loans, more reasonable interest rates and better payment plans. Plus, there’s the extra financial security associated with a name-brand bank.
- However, they may not be the best places to apply, as they have strict requirements, particularly for new businesses. If you or your cannabis store have bad credit, a low income or ongoing debt problems, you may not qualify.
- Additionally, some banks are hesitant to approve any sort of cannabis business for financing. In that case, you might have an easier time qualifying with a smaller bank, where regulations are more forgiving.
Credit Unions
- Some borrowers would rather apply with their credit union because of the benefits they receive. Qualified members are often eligible for larger loans, better rates and more adjustable financing conditions.
- On top of your membership benefits, borrowing regulations can be more lenient than a bank’s, especially for experienced business owners. Not to mention, other members can invest in your cannabis dispensary.
- The problem is that it can take a lot of time, money and effort to join a credit union or see any of your membership benefits. Similar to a bank, newer or riskier cannabis businesses may have trouble qualifying.
Alternative Lenders
- Can be good options if you have bad credit, a low income or prior debt problems. Typically, loan approval is more dependent on your income, the security you can offer (if any) and the viability of your business plan.
- Also, many private companies are less concerned about the liabilities of funding a cannabis operation. Some alternative lenders even specialize in business financing and offer better loan conditions than financial institutions.
- Most alternative lenders charge higher rates and fees in exchange for smaller business loans. In addition, private companies are harder to regulate, so there can be more probability of scamming, fraud and predatory rates.
The Best Business Loan Providers For Your Cannabis Store
Amount APR Term (months) 
1k-300k Fee-Based: Starting at 9% 12- 60 Learn more 
5k-300k 8% – 29% 6-18 Learn more 
1k-500k +5.9% 3-60 Learn more 
Up to 300k 8%-22% 6-12 Learn more 
5k-500k - 6-18 Learn more 
100K + 6.05% + 60 Learn more 
5K-100k 15%+ 12-18 Learn more
What Are the Laws and Regulations of Owning a Cannabis Store?
To open any business, you must first acquire permission from whichever federal, provincial/territorial and municipal entities that govern the area you’re building it.
Since cannabis is a previously criminalized substance and presents certain public health concerns, there are also many laws and regulations that apply to commercial dispensaries and grow operations, including but not restricted to:
Business License(s) & Permit(s)
In Canada, a General Business License is required to operate legally within a specific province or municipality. The business must also be registered as a sole proprietorship, partnership, cooperative, or corporation. If you want to expand into other areas, you’ll have to comply with their regulations as well.
Because you’re selling goods (some of which can be harmful) and potentially using up a lot of resources (especially if there’s a grow house on the property), your cannabis store could also need these permits:
- Sales tax
- Zoning
- Health
- Environmental
- Police & Fire
- Signage
Sales & Marketing
The federal government is responsible for imposing any regulations that apply to the production and marketing of cannabis, such as the:
- Products and quantities your business can cultivate, buy, or sell
- Ingredients and levels of potency your products can contain
- Promotional activities, services and items your store can advertise
- Packaging and labelling your products need (health warnings, etc.)
Cannabis Distribution & Selling Regulations
Every province and territory has its own rules for the sales and distribution of cannabis. For example, setting the minimum age a client must be to buy your products and how your business should be operated.
There are some areas where the government controls all sales and distribution of cannabis, so you cannot own a private dispensary or grow house unless it’s a certified medical outlet.
| Province/Territory | Legal Buying Age | Where Cannabis Can Be Sold |
| Alberta | 18+ | – Privately/publicly licensed physical stores – Government-run physical stores – Government-operated online stores |
| British Columbia | 19+ | – Privately/publicly licensed physical stores – Government-run physical stores – Government-operated online stores |
| Manitoba | 19+ | – Privately licensed physical stores – Privately operated online stores |
| New Brunswick | 19+ | – Government-run physical stores – Government-operated online stores |
| Newfoundland & Labrador | 19+ | – Privately/publicly licensed physical stores – Government-operated online stores |
| Northwest Territories | 19+ | – Publicly licensed physical stores – Government-operated online stores |
| Nova Scotia | 19+ | – Government-run physical stores – Government-operated online stores |
| Nunavut | 19+ | – Government-run physical stores – Government-operated online stores |
| Ontario | 19+ | – Privately licensed physical stores – Government-operated online stores |
| Prince Edward Island | 19+ | – Government-run physical stores – Government-operated online stores |
| Quebec | 21+ | – Government-run physical stores – Government-operated online stores |
| Saskatchewan | 19+ | – Privately/publicly licensed physical stores – Privately/publicly licensed online stores |
| Yukon | 19+ | – Privately licensed physical stores – Government-operated online stores |
Alternative Ways to Finance Your Cannabis Business
Although a business loan comes with many benefits and can offer additional funding, it might not be the solution your cannabis dispensary needs at the moment. Don’t worry, there are other financing products that can help you build your cannabis business and cover its expenses, such as:
Business Line of Credit
A business line of credit allows you to borrow from a revolving credit limit. Like a credit card, you withdraw from it as needed and are left with monthly balances, with the option of making minimum or partial payments.
This makes a business line of credit good for covering smaller recurring costs, like paying utility bills and refilling inventory. Plus, you’ll only be charged interest on your outstanding balances. The less debt you carry, the cheaper your line of credit is.
Merchant Cash Advance
A merchant cash advance is when your lender provides you with financing in exchange for a portion of your future credit and debit card sales proceeds.
Typically, payments are more frequent (sometimes weekly) and financing terms are longer (often open-ended) than a business loan or line of credit, making this a great option for stores that rely on sales and that may experience slow weeks or months.
Equipment Loan
You can use an equipment loan to lease or purchase whatever vehicles, tools and machinery your cannabis business needs. While you can borrow a lump sum of money and repay it in installments, many lenders will pay your equipment provider directly.
An equipment loan is secured against the equipment itself, so your lender can legally repossess and resell it if you miss too many payments.
Cannabis Business Financing FAQs
Do you need a business plan to get a loan for your cannabis store?
- License & Registration Info
- Current & Projected Revenue
- Debts, Assets & Liabilities
- Owners, Partners & Investors
- Staffing Details
What does it cost to get a business loan for my cannabis store?
- Principal – Typically, a business loan is divided into equal installments and lenders will offer you a selection of payment frequencies (monthly, weekly, etc.), with the option of repaying your debt early (often penalty-free). More often than not, larger payments and shorter terms come with higher interest rates.
- Interest – Your interest rate can vary based on your business plan, finances and credit score. The stronger these elements are, the lower the rate. The shorter your repayment term is, the less interest you’ll pay overall. While some lenders charge fixed rates that won’t change during your loan term, others offer variable rates, which fluctuate with the Bank of Canada’s prime rate.
- Fees – It’s also essential to consider the fees that come with your repayment plan. For instance, you may be charged one-time fees for any administrative tasks your lender must perform, such as loan origination and document processing. Plus, any late, short or missed payments that are could be subject to penalty fees, along with extra interest on any unpaid balances.
How do I get a license for my cannabis store?
Looking For Financing For Your Cannabis Dispensary?
The right business loan can help you achieve your goals and grow your business. If you’re looking for the right type of financing for your cannabis business, Loans Canada can help.
Glossary
| TERM | DEFINITION |
|---|---|
| Accounts Payable | Money that is owed in relation to a product or service to a creditor. Because the money is owed to an individual or entity, accounts payable are considered to be an obligation. |
| Accounts Receivable | Money that is owed in relation to a product or service from a borrower. Because the money is due to an individual or entity, accounts receivable are considered to be an asset. |
| Appreciation | The increase in an asset’s value over time. Appreciation is often the result of an increase in demand, weakening supply and/or changes in the economy. |
| Arrears | Money that should have been paid and is now overdue. |
| Audit | The process of an impartial, independent individual or entity inspecting completed work in relation to a specific framework. Audits are commonly performed on financial statements to ensure that they are accurate, fair and align with accounting rules and regulations. |
| Balance Sheet | A formal financial statement that communicates the current financial position of a business at a specific point in time. Assets, liabilities and equity are all reflected on a balance sheet as well as net income (or loss) earned over a previous period of time. |
| Ballon Loan | Unlike regular loans, a balloon loan isn’t fully amortized over a particular period of time. Instead, only part of the loan is amortized over the loan’s term and the remainder of the loan becomes due at the end of the loan’s term. The loan’s term tends to be short and this type of financing is considered to be aggressive. |
| Better Business Bureau (BBB) | A non-profit organization that assigns rankings to businesses, charities and non-for-profit corporations. The BBB collects and stores data regarding companies to set rankings. Their goal is to prevent businesses from failing to meet defined standards of operation. |
| Book Value | The value of an asset on a company’s books. In other words, the value of the asset on the balance sheet. |
| Broker | A person who buys and sells goods and services on behalf of another person in exchange for a fee. |
| Budget | A best guess of an individual or entity’s income and expenses for a specific period of time. |
| Business Credit Report | A detailed report that is meant to provide potential lenders with information to allow them to determine the business’ creditworthiness before extending credit. There is much more information in a business credit report when compared to an individual’s credit report. Business credit reports are generated and regulated by the credit bureau. |
| Business Credit Score | A number that represents a business’ creditworthiness based on information within the credit report. The credit bureau calculates and regulates business credit scores. |
| Cash Flow | The cash that comes in and goes out of a business. Cash flow is poor when more cash is going out than in. Cash flow is good when more cash is coming in than out. |
| Compound Interest | Earned interest that is added to the principal amount when interest for the next period is calculated. In other words, compound interest is interest earned on interest. |
| Debt Service Coverage Ratio | The ratio of operating income available for use to debt servicing. Debt servicing includes interest, principal and lease payments. The main goal is to determine whether or not a business is producing enough cash to cover their debt obligations. |
| Deferment | The act of pushing something off to a later time. In terms of finances, this means paying a debt later than when it’s due or creating an arrangement where the customer receives the product or service now but pays later. |
| Depreciation | The decrease in an asset’s value over time. Depreciation is most commonly a result of wear and tear from use, but can also be a result of a decrease in demand, increasing supply and/or changes in the economy. |
| TERM | DEFINITION |
|---|---|
| Earned Income | Money that is received or receivable resulting from finished, paid work. |
| Employer Identification Number (EIN) | A number used to identify a business regardless of whether they are a sole proprietorship, partnership, corporation or other non-personal entity. An EIN is the American version of a Canadian business number. |
| Escrow | Something, such as money, a document or an asset, kept in the custody of a neutral, third party until a specific condition has been met. |
| Financial Statements | Formal records depicting the financial position and activities of a business, individual or entity. Financial statements are very structured and are subject to rules and regulations. Usually, financial statements include a balance sheet, income statement and statement of cash flows. |
| Fixed Expense | A cost that does not fluctuate when there is an increase or decrease in business activity, such as sales or production. Examples of fixed expenses include a full-time employee’s salary, rent and insurance, among others. |
| Gross Profit | The amount of money earned after considering expenses directly related to producing a product or service. Gross profit is typically calculated on a company’s income statement by taking revenue and subtracting cost of goods sold. |
| TERM | DEFINITION |
|---|---|
| Incentive Stock Option (ISO) | A company benefit that gives an employee of that company the right to buy stock shares at a lower price than the fair market value. There is also the added benefit of a tax break on any profits earned from the stock share purchase. |
| Income Statement | A formal financial statement that communicates the income, expenses and net income (or loss) for a business over a particular period of time. |
| Incorporated | The state of being formed into a legal corporation. |
| Inflation | A general increase in prices of goods and services in addition to a decrease in the purchasing power of a nation’s currency. |
| Liability | The state of being responsible for something particular. In the business world, this typically refers to legal and financial responsibilities. |
| TERM | DEFINITION |
|---|---|
| Market Value | The amount that an asset is worth or can be sold for in a particular market place. |
| Micro-Loan | A small amount of money lent to new businesses with a low-interest rate. Micro-loans are typically issued by individuals as opposed to large lending bodies like banks or credit unions. |
| Partnership | A type of business where two or more individuals share ownership, pool resources and split responsibility for the company’s operations. Partnerships can be classified as general or limited. |
| Profit | The difference between the amount of money earned and the amount of money spent to earn the money. |
| TERM | DEFINITION |
|---|---|
| Retained Earnings | The amount of net income left over after a business has paid out dividends to their shareholders. Often, the retained earnings are used within the business for investment, growth or capital purchase purposes. |
| Sole Proprietor | An individual who is the only owner of a business known as a sole proprietorship. That individual is entitled to all of the profits after all liabilities and taxes have been paid. |
| Tax Refund | An amount owed to or received by a taxpayer from the government resulting from taxation. A tax refund typically occurs when an individual has paid more income tax throughout the year than what was owed, has large tax credits or did not earn enough income to be required to pay tax by law. |
| Tax Return | A legal form which is completed by a taxpayer to determine tax payable to the government or tax receivable from the government. Tax returns require information about the taxpayer, such as annual income, annual expenses, personal information and financial information, to determine the tax asset or liability. |
