Marijuana Dispensary Small Business Loans
Your first Marijuana Dispensary small business loan is an important marker in your company’s history. It may represent the birth of a new business venture or a revamping of your up-and-running Marijuana Dispensary small business.
A Marijuana Dispensary small business loan application might seem a little intimidating at first. Securing financing will take some knowledge and forethought on your part. However, if you do your homework and get prepared in advance, the process can be smooth and painless. Here is a breakdown of everything you need to know about applying for a small business loan:
Before jumping into a Marijuana Dispensary small business loan application, it’s in your best interest to explore and understand all of your options. Financing is available in the form of business credit cards, loans, angel investments, and several other means.
Study the pros and cons of each financing method. You will likely find that one of these routes makes more sense for your situation than the others.
If you conclude that a Marijuana Dispensary small business loan is your most sensible option, the next step is to become intimately familiar with your credit scores and your use case. Then, you’ll be ready to tackle the application process.
Understanding Your Credit
Credit is the most important factor when it comes to Marijuana Dispensary small business loan decisions. Your payment history is crucial for demonstrating your ability to pay back borrowed funds.
Essentially, you’re a total stranger to a lender whom you’re asking to give you, potentially, thousands of dollars. An “IOU” isn’t going to cut it!
Your lender needs to know that they can trust you to pay them back in a timely manner. Think of your credit score as a numerical representation of your financial trustworthiness.
Both your personal and business credit score will strongly impact your lender’s decision. Your scores also determine the loan terms. While credit isn’t the only factor taken into consideration, they are the biggest pieces of the puzzle. Understanding what each number means—and how to improve them—is the first step towards a successful Marijuana Dispensary small business loan application.
Business Credit Scores
Particularly at the start of a new venture, business owners are guilty of mixing personal and business finances. This is problematic because it creates a bit of a mess when it comes to tax time—or requesting a loan.
Setting up a proper business account early will make your life much easier down the road. It will help your business build a credit history and prevents personal financial problems from affecting your business credit score.
Personal Credit Scores
Even if you do have separate accounts for your business, your personal credit score is still relevant to lenders. Why is this the case? Imagine if you owned a trucking company and you hired a professional driver to join your team, only to learn that he has racked up a pile of speeding tickets on his personal time.
In the same sense, your personal credit score plays a big role in your budding lender relationship.
Your repayment history is one of the biggest factors affecting your personal credit score. Paying your bills on time is the best way to keep your score healthy. Your score will fall between the range of 300 to 850. A score of 700+ is generally considered “good.”
Some common causes of low credit scores include:
• Carrying a high outstanding balance, even if you pay your bills on time. (Try to pay more than the minimum payment).
• A high utilization rate. (The percentage of your revolving credit limit currently in use).
Tip: To determine your utilization rate, divide your current balance by your credit limit. Then, multiply by 100. You’ll want to keep your utilization rate below 10%.
Improving Your Credit Score
You can’t improve your credit score without looking at it (don’t be afraid!) and understanding what it’s telling you. Anyone can access their credit report for free. Credit Karma is a popular credit reporting site that offers personalized suggestions for improving your score.
Raising your credit score does require some time and patience. You can’t expect to see it jump 40 points overnight. However, examining your report will give you a lot of much-needed insight before putting in your Marijuana Dispensary small business loan application.
Here are a few important things to look for on your credit report:
• Errors: It is possible that your credit report may contain inaccurate information. If you see an account that’s not yours or notice that a debt you’ve previously settled has not been cleared, you should report it right away. Errors or late payments will stay on your report until they’ve been resolved.
• Past-due debt: Your report will detail exactly how much money you owe and to whom. If you’re trying to improve your score, get in touch with these companies and set up a debt repayment schedule. Some creditors may even agree to a goodwill adjustment, which will remove the late payment from your report.
• Tax liens: Federal or state tax liens should be paid off as soon as possible. A payment plan is good, but one lump sum payment is better.
Other Credit Tips:
• Keep your balance low.
• Don’t close an account when you pay it off.
• Diversify your credit, if feasible.
• Use a credit monitoring provider to watch for fraudulent or negative activity.
Making Your Argument
When it’s time to get the application process going, be sure to make your loan request as specific as you can. This helps lenders make a more informed decision about your loan. Identify exactly what you’re asking for and be able to explain why your business needs it.
You can start by creating a budget to show how you intend to allocate the funds from a Marijuana Dispensary small business loan. For instance, if you need to buy a piece of equipment, provide the current market price of the item. Estimate how much income that piece of equipment will generate for your business.
Financial states are another important element of your Marijuana Dispensary small business loan application. You’ll want to examine your statements from the last several years. Your accountant can help you prepare the following documents to supplement your loan application:
• Income Statement (showing profit and loss)
• Balance Sheet
• Cash Flow
Looking at your financial statements, ask yourself these questions:
1. Where and how am I making money?
2. What are my main costs?
3. Am I profitable?
If your business is not yet profitable, you need a plan to make it profitable. Without a plan for profitability, you’ll have a tough time making a case for a Marijuana Dispensary small business loan.
You’ve made it this far—you’ve pulled your credit report, use case, and financial records. At this point, you’re prepared to complete a Marijuana Dispensary small business loan application. From here on out, the paperwork should be a breeze.
Most lenders will ask for the following supporting documentation:
• Financial Records: Your income statement and balance sheet dating back two or more years.
• Tax Returns: One to two years of business tax returns.
• Accounts Payable/Receivable: A full breakdown of money coming in and going out.
After you submit a completed application, you will (hopefully!) receive an offer from the lender. The lender will use the information you provided to determine the loan amount and terms that are right for your business. The offer will include an APR and interest rate, both of which are generated from your credit scores.
It’s important to understand the difference between interest rate and APR. The interest rate represents a percentage of the loan amount that the lender is going to charge you to take out the loan.
APR, on the other hand, represents an annual average of the total interest you should expect to pay (fees and service charges included). Compare both numbers and be sure you understand the exact terms of your Marijuana Dispensary small business loan before signing on the dotted line.