Hemp Loan: What is it?

CBD hemp oil in a glass bottle.Hemp seeds in a wooden spoon the hemp leaf is placed on the table. The concept of cannabis for medicinal purposes. Hemp oil extraction components. Close up.

The Agriculture Improvement Act of 2018, also known as the 2018 Farm Bill,  legalized the growth, sale, and transportation of hemp across state lines and removed hemp from the list of Schedule I controlled substances. With hemp now legalized, cannabidiol (CBD products), which are derived from hemp, are being sold across the United States. Many business owners are seeing new opportunities for hemp and hemp-based products, and it’s likely you have a vendor near you. Although hemp is no longer considered an illegal substance, the conflicting regulations at state and local levels mean that the substance often occupies a bit of a legal “grey area” that can make obtaining financing and banking services challenging. Traditional financial institutions, like banks and credit unions, are less likely to provide banking and financial services for hemp businesses because they don’t want to wade through the regulations in order to do so. While it may be possible to obtain a loan from a traditional institution, a hemp loan is a loan specifically provided to hemp businesses by commercial lenders that specialize in the industry, providing more options that are better suited to meet the needs of a hemp business owner. Here’s what hemp loans have to offer. 

Less Paperwork

Although the cultivation and distribution of hemp and hemp products are now legal on the federal level, many traditional lenders still perceive hemp and CBD businesses as risky, which means they may require business owners to perform monthly inventory and cash audits in order to guarantee payment. Commercial hemp lenders are more understanding of the nature of the hemp industry and are often more flexible, allowing business owners to avoid monthly audits as long as payments are made on time. That means that business owners spend less time doing paperwork and more time growing their businesses each month. 

Integrated Expertise

When you choose a hemp loan from a commercial lender, you are working with an industry specialist who likely employs experts in finance, business development, and hemp businesses. Unlike traditional lenders, which seek to apply the same financial models to all small businesses, commercial hemp lenders recognize that traditional financial models may not apply to businesses in the hemp and CBD industry. These lenders usually have experience helping startup organizations get funded and start growing, which means you’ll find valuable advice that you wouldn’t get from a local bank. 

Smooth Application Process

The knowledge of commercial hemp lenders comes in especially handy during the application process, which could prove fraught if pursued through traditional avenues. Commercial lenders that work primarily with businesses in the hemp, CBD, and cannabis industries are intimately familiar with the financial constraints that are unique to these businesses. As a result, hemp business owners will experience a smoother application process, and your lender will be able to help provide guidance about what type of loan will work best for your business and keep you in compliance with all federal, state, and local regulations. 

Lower Fees

No one wants to pay extra for financing, regardless of whether they’re in an industry perceived as risky or not. Hemp loans are likely to have lower financing fees for qualified applicants because commercial hemp lenders understand the industry and the surrounding regulations. Financing fees for a hemp business loan will generally range from 2.5-3.5 percent, and credit limits typically range from 100,000 dollars to 5,000,000 dollars. 

Hemp loans through an experienced commercial hemp lender are the best option for your hemp business if you’re looking for financing. While you may have more options than cannabis business owners, there is value in working with industry insiders to finance your business.