How to Use Hard Money Lenders to Fund Cannabis Buildings and Warehouses
What is a Hard Money Loan?
A hard money loan is a short-term loan, typically with a high interest rate, that is used for real estate transactions. The collateral for the loan is the property being purchased rather than the credit of the borrower.
Banks and other traditional lenders do not make hard money loans. These types of loans are provided by individuals, and sometimes companies, who are looking for investment opportunities.
Why Choose a Hard Money Loan?
Because of legal issues surrounding the cannabis industry, it is extremely difficult to get a traditional loan for real estate intended for use in the marijuana business. Any traditional lender that is federally chartered cannot offer loans for the cannabis industry because marijuana is a controlled substance under federal law.
This is where private lenders come in. They can offer several types of loans to help get you started with cannabis real estate.
Common Types of Cannabis Loans
Business Loans: Business expansion, payroll, marketing, and inventory are some examples.
Grow Operation: Agricultural investment for facilities to cultivate marijuana.
Equipment Leasing and Loans: Need capital to buy equipment? Leasing and loans are available for irrigation, lighting, HVAC, CO2 extraction, and more.
Manufacturing Facility: Some real estate lenders are becoming more willing to provide loans for facilities that manufacture cannabis products.
Medical Dispensary and Recreational Dispensary: While commercial lenders are still largely unwilling to consider loans for marijuana dispensaries, even medical types, private lenders are more and more willing to invest. Lenders will want to see a solid record of consistent revenue.
How to Find a Hard Money Lender
Start with an internet search and look for lenders in your area. This will give you a good list to start from and you can then contact, interview, and evaluate them to find one that is right for you. Social media is also a good place to search.
Another place to find hard money lenders is at a local real estate investment club. Attend a meeting if there is one near you and begin networking with other borrowers as well as lenders. You will be able to share information and experiences.
A reputable lender should have a good reputation, be able to fund your loan in a few week or less, be flexible and able to tailor to your needs, and be able to show you how the rate of return will be affected by the terms of the loan.