Investing in the cannabis industry is more profitable than ever. There is a lot of money to be made in the emerging medical and recreational marijuana industry and entrepreneurs are getting in on it now. This new industry offers countless opportunities for real estate investors considering that these entrepreneurs need spaces to manufacture their products and operate their businesses. These entrepreneurs know that there is a very high demand for their products but what they are missing is the proper financing for their stores and warehouses. Also, because the selling marijuana is not legal on a federal level, these entrepreneurs cannot go to a bank to get a loan. This is where hard money lenders come in.
For smart investors and lenders, now is the right time to invest in the legal cannabis industry. But first, you should understand the legal risks and guidelines. Currently, over half of the states have legalized marijuana use (some recreational but mostly medical). More and more states will continue to legalize marijuana in the next several years which means there will be a great deal of growth. With growth comes a need for capital.
These new startup businesses require funding if they are going to buy property and equipment for their operation and since banks are refusing cannabis business, they are turning to hard money lenders. For those who are interested in trust deed investing, this is the market to invest in and you can invest in it with hard money lenders.
Because these commercial loans are hard to come by, investors can charge high interest rates which will allow them to make much more money than they would on other types of hard money loans. Some lenders take a substantial equity stake in exchange for startup capital and others charge high fees for short-term, high-interest financing.
This is how it works. The cannabis startup company will qualify based on its monthly revenue, and a repayment plan is organized with weekly or bi-monthly payments. The various operations that have been in business for even a short amount of time are usually receiving a daily revenue stream and will have no problem meeting payment obligations. Due to the restrictions placed on the industry by the big banks, business owners turning to private capital are more than willing to pay higher fees and interest rates to satisfy their funding needs.