The Cannabis industry is often represented as a cash cow by those that do not know any better.
Those of you that have gone through the arduous and cash intensive process of establishing a legal cannabis business and calculated the costs versus profits there is often times little left over to reinvest in your business. To make matters more difficult, there are little to no options for entrepreneurs in the Cannabis Industry to finance their efforts leaving the most tenacious business owners feeling like the only way to succeed in the industry is to have deep pockets. Cannabinoid CO2 Extractor, security systems, Seed To Sale tracking systems, cannabis grow lighting systems, cannabinoid testing testing equipment are just a few examples of equipment needs that cost between $20,000 and $250,000 or more! With most banks and leasing companies unwilling to offer financing to the cannabis industry that leaves most cannabis businesses unable to expand and improve their businesses without cash. There are venture capitalists willing to loan the needed cash but due to the lack of traditional financing many cannabis entrepreneurs are left looking at interest rates in the 40-50% range!
On top of that (as you probably know) the cannabis industry is incredibly competitive, now more than ever. So how can you give your business a competitive edge? What if you need a $50,000-$250,000 CO2 cannabinoid extractor, HVAC, Security system or complete seed to sale tracking system to take your business to the next level? Maybe you need to upgrade or expand your cannabis cultivation facility? Need to purchase a warehouse, land or retail location? Well the Merchant Doctor team has partnered with the most service oriented and ethical leaders in the industry to not only create the only legitimate solution to accept credit cards for the cannabis industry but is now able to offer affordable equipment leasing, cash advance, and real estate loan options for your cannabis business.
Pros and Cons of a Cannabis Equipment Lease.
What is an equipment lease and how can it benefit your business? An equipment lease is for all intensive purposes a rental agreement for needed tangible or intangible items. Leases can vary greatly depending on how they are written but will generally be for a specific period of time (such as 36 months) depending on the amount of the equipment lease and many offer the option of a buy out at the end of the period. In the cannabis industry where getting a line of credit to expand your business can be incredibly difficult or simply impossible a lease may be the absolute best tool your business has for expansion or simply just to stay competitive and in pace with technology. Of course you could simply save the cash needed to make a full purchase of the equipment that you are in need of but that may choke your reserves and or simply take too long to maintain your competitiveness. A lease can make a large dollar purchase approachable by breaking the payments into small monthly installments (much like a car loan or mortgage). Whether you need computers, a supercritical CO2 extractor, vehicles, a security system, or a grow lighting system you want to make the absolute best financial decision for your business and an equipment lease can be a great thing to consider.
Are there downsides to equipment leasing? As with any decision there are always pros and cons.
So what are the downsides to an equipment lease for your cannabis business? First and foremost of course is that with a lease, just like any loan product, the cost of the equipment that you are “financing” will be more expensive overall when compared to a cash purchase. Your monthly lease payments may be fully deductible but in exchange you may loose the ability to take depreciation deductions. Your CPA would be the best person to consult you on which is more advantageous for your business. Before you jump into a lease, do your homework on the ROI of the equipment that you are considering to purchase. For instance, is it necessary? Will it grow your business by increasing sales, creating a safer environment, or expanding into other sectors of your industry? How will the equipment pay for itself? Let’s look at a few examples of equipment that could be leased by your cannabis business and how they may help your business.
What could your cannabis dispensary or cannabis cultivation facility do with a something like a CO2 Extractor (Supercritical fluid extractor)?
CO2 Extraction is used to produce a pure transparent essential oil of all the beneficial cannabinoids without leaving behind heavy metals and other contaminants that old school butane processing creates. These systems are incredibly efficient at maximizing your yields and profitability by maximizing every harvest to include less desirable buds and trim into a concentrated and effective product that can be used in caplets, edibles, and vaporizer cartridges. These systems can greatly expand your customer base and increase your sales and efficiency. Unfortunately this technology can be very expensive with commercial grade CO2 cannabis extraction systems ranging in price from $50,000-$250,000 making them out of reach of many dispensaries and cannabis production facilities without some way to spread out the cost. Once you look at the tax benefits (ask your CPA) and the ability to spread out the cost without strangling your cash reserves, equipment leasing can often be the absolute best way for your business to acquire one of these systems.
What is a Cannabis Seed to Sale system?
One of the greatest tools a cannabis dispensary or cultivation facility can purchase is a true seed to sale system. These systems are not just a good way to manage your inventory but the absolute best way to protect it. With the capability to bar code scan and then track a seed from germination, through the growth phase, to harvest, and right to the sale these systems maximize your efficiency, provide detailed reporting (to keep regulators and bookkeepers happy), and empower you to make sure that none of your product is evaporating! A good cannabis seed to sale tracking or ERP system can even integrate directly into your security system which will allow you to not just monitor your facility but to add biometric tracking functionality. With biometric tracking you are able to grant your employees different levels of access to the various areas of your business and maintain full records of where your employees are going and how long they are staying there. This can be an incredibly important function of cannabis business management as this industry is extra susceptible to employee theft and the ever watchful eyes of the law. A good seed to sale system, however, can be pricey so financing the equipment or implementation costs can free up valuable cash to invest in other areas of your business.
Cannabis Grow Lighting
You probably already know how important a great Cannabis Lighting system is and more importantly how expensive good cannabis grow lighting is.
Not to mention the cost of the humidity control, temperature control, hydroponics, and ventilation systems necessary to grow high quality cannabis. Poor cannabis lighting can result in low yields, disease, hermaphrodite plants, and or complete failure which is not an option. Not only because you have put a lot on the line to open and operate your business but because regulations may require your production to make up a certain portion of your sales. An upgrade to your existing system or an expansion of your cultivation operations require a high quality cannabis grow light system which can dramatically increase your efficiency and profits. Being able to get an equipment lease for your lighting and or complete cannabis grow system could help to guarantee the success of your business.
Maybe you are just looking to expand your operations and simply need a business loan.
The Merchant Doctor has simple cannabis business loan options too. You can get the funding you need to expand, improve, or just about anything you need within a week! If you would like to learn more about our cannabis business loan program let us know!
The flexibility of having equipment leasing available to your cannabis business can not only help you get an edge on the competition or expand your operations but can help you guarantee your success in this ever more competitive industry. Becoming a success in the industry no longer requires you to cheat the system and The Merchant Doctor is proud to offer affordable equipment leasing to the cannabis industry and is here to help you and your cannabis business succeed.