In 46 states of the United States and all the provinces of Canada, cannabis has been legalized in at least some of its forms.
Marijuana is big business, and at least on the state level in most states, it's a legal business. Like every other business, however, cultivating cannabis is regulated, and getting a license to grow marijuana will take some work. In many states, it will also take some serious cash.
Many marijuana consumers are very knowledgeable about their favorite flower. Some may have informal experience growing and selling weed. But claiming a piece of the multi-billion dollar legal cannabis market in the US and Canada requires licensing and compliance with state regulations in the US and HealthCanada regulations in Canada.
In the USA, cannabis cultivation licenses are issued by the states for a certain number of plants growing at a specified location, almost always in a grow room. Securing a state grower's license reduces the risk of intervention by overzealous federal law enforcement officials.
Canada encourages people who know how to grow pot to enter the business, waiving some background requirements to get knowledgeable people into the business. In Canada, it's the grow room itself that causes the most delays in getting a cannabis cultivation license.
A micro cultivation license, for an indoor cultivation facility of 200 square meters or less, is only granted for indoor grow rooms, and only after they have been completely built out with strict air quality, temperature, humidity, contamination, and automated recordkeeping requirements.
Getting a license to cultivate cannabis in Canada requires meeting more technical requirements and usually requires a larger capital investment, but getting a cannabis growers license in the United States requires navigating differences in regulations state by state. Because American regulations are more complicated and there isn't a federal agency like HealthCanada to help growers comply with them, we'll focus our attention on getting a cannabis growing license in the USA.
The first decision all legal cannabis entrepreneurs need to make is which group of consumers they intend to reach. There are only 17 states that have made cannabis fully legal as of spring of 2022. Another 31 states have legalized medicinal marijuana. (Cannabis remains fully illegal in Idaho and Mississippi.) State rules may make all marijuana legal for medical purposes, or limit the legal market to selling low-THC products for medicinal use.
Know your legal market before you do anything else.
The next thing you need to do is to budget for all the licenses you will need to start your business. License fees vary greatly from state to state. In Alaska, for example, you will need to pay a $1,000 cannabis growers license application fee. If the license is granted, you will then need to pay $5,000 for the state to issue your grower's license and $7,000 a year to renew it. (Alaska has a lower-cost license for micro cultivators.) There are separate $1,000 fees for licenses to make edibles and concentrates.
Arkansas charges a $100,000 annual license fee and requires growers to get a $500,000 growers bond. Michigan charges growers $500,000 a year to license growing 1500 plants. Pennsylvania requires growers to prove they have $2 million in funds, with $500,000 in a liquid account.
California, in contrast, charges outdoor cottage growers of cannabis just $135 to get their license and $1205 a year to renew it. Larger growers, however, may pay license fees of up to $44,517 a year. Maine licenses cannabis growing for medicinal use at a cost of $300 per patient per year. Montana charges $100 per patient per year, with a maximum fee of $5,000 for 50 patients or more. Massachusetts grants licenses for up to 5,000 square feet in outdoor cultivation for $625 per year.
Regulatory costs for growing cannabis don't stop with getting a grower's license. You will also need to make sure your entire operation meets state and local building codes. You will need to invest in systems that keep records of temperature, humidity, and fertilizer use for state-mandated quality control.
While some micro cultivators in cannabis-friendly states can set up their grow rooms and gardens for just a few thousand dollars, full-scale commercial production easily costs millions of dollars. If you don't have lots of free cash—and many of the most knowledgeable growers don't—who will invest in your operation or lend you the money?
Whether you need equipment funding to get your growing operation fully up to speed, or another type of funding solution, it's important to seek out an experienced team of cannabis financing specialists like Canna Business Financing. Navigating funding in our industry can be difficult, but we'll assist you every step of the way.
Canna Business Financing provides start-up funding, working capital, real estate financing, equipment financing, CBD merchant services, and industry banking services for cannabis growers across the United States. You can get pre-approved today!
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