The cannabis industry includes a range of companies and organizations. On one hand, there are marijuana growers using high-tech equipment to cultivate premium quality harvests. On the other, there are product manufacturers, dispensaries, medical marijuana clinics, cafes, and CBD-focused organizations.
One thing all of these businesses have in common is the use of some form of equipment as part of their business process. Indeed, cannabis equipment is essential to thousands of companies involved in the cultivation and processing of this unique plant.
Cannabis equipment leasing or other financing types can help businesses access machinery without impacting their liquid capital. So, whether you require hemp equipment financing, marijuana equipment financing, or access to capital to improve your cannabis business, this post is for you.
What is Cannabis Equipment Leasing?
Cannabis equipment leasing can be used to acquire long-term access to machinery required to cultivate cannabis successfully. Cannabis cultivation equipment is typically offered as a long term lease. As cannabis growing equipment can be used multiple times to grow new crops, long-term leasing is the preferred form of financing. Additionally, longer leases tend to have smaller monthly payments than short-term leases.
Cannabis equipment leasing tends to be provided to marijuana growers looking to expand or renovate their cultivation processes.
That said, lenders are starting to offer cannabis equipment financing options for startups. Below are some examples of cannabis equipment that cannabis growers may need to lease:
- Security Equipment: Cultivating cannabis always comes with a risk of theft.
- HVAC Equipment: Temperature control, humidity, and airflow are essential components to a successful marijuana growing operation.
- Lighting Equipment: There are multiple choices for lighting equipment for growing cannabis. Your selection will be based on utility rates and the size of your operation.
- Extractor Equipment: This equipment is typically used to generate extractions and create cannabis concentrates.
Equipment Leasing vs. Financing
There comes a time to decide whether buying, financing, or leasing is the best option for your company. Leasing is a great option for items that will need to be replaced frequently. Buying may be more cost-effective if you plan to use a piece of equipment long-term.
However, just because you have enough money for an outright purchase doesn’t mean this is the best option. This capital could be better spent on other areas of your business, depending on your goals.
Business loans give you the option to pay off equipment bit by bit with low interest rates. Alternatively, refinancing existing equipment can help you to access cash as and when it’s needed. Refinancing can also help you acquire better terms and loan rates depending on market conditions.
If you opt for a cannabis equipment loan, you’ll have to decide between a fixed or variable rate. Variable rates are best suited to entrepreneurs with high risk tolerance. Monthly payments are generally lower, but they can increase significantly towards the loan term’s end. Fixed-rate loans have higher monthly interest payments but provide more stability.
Benefits of Cannabis Equipment Financing
Marijuana equipment financing offers a range of benefits including:
- ImprovingCash Flow
Your business has a limited amount of cash available to spend on expenses, new opportunities, marketing, and other overheads. Cannabis equipment leasing can help you access as much in-house cash as possible.
- Preserving Other Lines of Credit
Equipment financing helps you conserve working capital while maintaining good relationships with lending institutions.
- Hedging Against Inflation
Utilizing equipment financing can help your cannabis business hedge against inflation risks. If you place a significant downpayment on equipment or pay for it upfront, your free cash is tied up. This makes financial sense in terms of inflation.
How to Qualify for Cannabis Equipment Loans?
Cannabis equipment leasing options work similarly to leasing opportunities in other businesses. As a cannabis business owner, you’ll typically have to follow these steps:
- Identify a need for the equipment or a need for an upgrade to existing equipment.
- Obtain a quote on the cost of the necessary equipment from a vendor.
- Complete a leasing application with the lender of your choice.
- Submit the required documentation for lease approval.
- Submit any additional documentation that is required (if applicable).
- Meet with a lender employee (if applicable).
If approved, you’ll have to sign a lease agreement, acknowledging all terms set by the lender. Next, the cannabis equipment will be installed, and your business will be able to reap the benefits of cannabis equipment leasing.
Work with L3 Funding
When you work with L3 Funding, securing finances for your business is straightforward and efficient. By completing four simple steps, you could be approved for the merchant funding you need. We can also help you with small business working capital to ensure you have the financial stability you need to grow your business.
Contact us today to learn more about our cannabis business loans and financing services and solutions.