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Let’s be blunt. Medical marijuana is legal in 29 states and Washington, D.C. Recreational marijuana is legal in Alaska, California, Colorado, Maine, Massachusetts, Nevada, Oregon, Washington, and Washington, D.C.. Despite these facts and that many other states also are on the path to legalization, most banks don’t want to work with those in the marijuana business. Much of their reluctance has to do with the overarching federal prohibition of weed compounded with the January 2018 decision by U.S. Attorney General Jeff Sessions to rescind a federal Department of Justice memorandum, which permitted state-sanctioned marijuana business to thrive despite the awkward situation between state and federal laws.
Regardless of the federal action, state lawmakers have announced their continued support for their pro-marijuana laws, clearing the way for marijuana dispensaries to continue operating. The uncertainty surrounding the laws have increased the ups and downs in sales at marijuana businesses, resulting in inconsistent cash flows. The good news is that marijuana business can continue to operate despite the volatility surrounding the business with the help of a merchant cash advance.
A merchant cash advance is a type of financing in which a business owner can receive a lump sum of money from a lender in exchange for a certain amount of its future sales at a discounted rate. Merchant cash advances are ideal for small and mid-sized high-risk businesses, such as marijuana dispensaries, because they don’t require stellar credit or extensive financial documentation, such as tax returns and bank statements.
Unlike small business loans, approval is based on business performance not personal credit. So, there are no worries about poor credit or no credit at all. Merchant cash advances also give marijuana businesses access to fast funding and easy renewals. While loans can take several weeks before you have money in hand, you can have money in your account in as little as 72 hours with a merchant cash advance. Equally important is the fact that you can renew your advance when at least 50% of your advance balance is paid back.
A bonus attached to merchant cash advances is that paying back funds is simple and easy. Like most loans, you never have to write a check to pay down your debts. Instead, payments for merchant cash advances are automatically held from your credit card transactions. This is especially important for those new to business because you are not saddled with a fixed monthly payment. What you pay is based exclusively on your sales because cash advances are revenue-based collections. So, if you have a tough month, you are not stuck paying a fixed amount. Instead, payments are based on a percentage of your daily sales. This is helpful because if you have a great month of sales, you pay more back sooner. This type of flexible payment structure is perfect for a marijuana business or any other business that is deemed high risk in the traditional lending industry.
Another plus that you may not have considered is that a merchant cash advance, unlike a traditional business loan, is not reported to credit agencies. It is actually treated like a sales transaction instead of borrowing.
Lastly, it may seem minor but merchant cash advances can help reduce stress and anxiety. With a merchant cash advance, there is no more worrying about what you do when a new law regulation threatens your business for a few weeks. The advance gives you the capital on hand to enjoy your work and pay for the staff or buy the additional product you need to keep up with demand.
About the Author: Michael Hollis is a business funding expert at the California-based merchant loan provider firm, First American Merchant. When he isn’t helping his clients secure funds, he’s more than likely spending time with his family and catching up on his favorite TV shows.