5 Reasons Why Access to Capital is Good

Some dispensaries are making cash hand over fist. Some processors have orders through the roof. Even many cultivators are generating serious yield on their crop.

So if life’s so good, why take out a loan? Let’s dig in.

1. Compete. If you aren’t a large, multistate operator, this one’s directed at you. These behemoths, from Acreage Holdings to Green Thumbs, are using the equity and credit markets to expand operations, acquire new stores, and increase their bottom line. Said differently, they’re using the capital markets to steal (dare I say “smoke”) your lunch. Access to your own pool of capital helps you fight back.
2. Emergency. To say the world is a unpredictable right now is an understatement (not to mention an overused-statement). Do you have a $50,000 slush fund in cash of emergency? Businesses in growth mode almost always run tight margins. In non-cannabis industries, this is fine because a bank can bail them out in 48 hours. Can your business say the same?
3. Opportunity. Prices are constantly changing. Great deals do not last long (what did the Economist say about the $5 gram laying on the ground?). Access to capital can help you pounce on low supplies prices, capture deals at your vendors, or even close a better lease at a hotter location.

1. Improve Credit Score. As cannabis operators, we don’t have the benefit of a Dun & Bradstreet score to share with creditors or hang on our fridge. The best next thing is a third-party, verifiable track record to point to you being an honest borrower. As the market matures, having experience with even a small loan can go a long way towards qualifying for a big one.
2. Increase Margins. Scale is everything! At larger quantities prices come down and margins expand. Given the 280e tax code, maximizing your gross margin may be the most important metric as everything else is considered “below the line.” Having extra dry powder to order more product at better rates can increase bottoms and directly impact your bottom line.

Interested in working capital or a line of credit? Lendica is here to help.