Capitalizing A Cannabis Business

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Those who want to get into Connecticut's new legal cannabis industry need an early start. Investors and credit unions want to start planning now. 

“The cannabis industry is a multi-million dollar industry, going into upwards of a billion dollar industry,” Luis Vega, a hemp farmer and member of the Minority Cannabis Business Association, says. 

“Step one, make sure you start your business plan, make sure you are a viable business with a roadmap on what you would like to do,” Vega says. 

It’s not cheap. 

“Just in Connecticut the fee to go is $3 million,” Vega says. 

That’s for a grower or cultivator license, which will require a lot of equipment and lighting. A license for a dispensary's start-up costs might be around $1.5 to $3 million. 

Access to capital will be a challenge for some. 

“Friends and family will be the first part. That's where people are going to scrape together the money in order to get the funding they’re going to need just for getting the license and doing the application,” Devin Schleidt, owner of the Greater Hartford-based business advisory firm Schleidt Works says. 

“The good news is the state has relatively low dollar amounts in order to put that together. A lot of people can apply and be part of the lottery,” he added. 

Schleidt, who plans raise $30 million for his new Connecticut Cannabis Capital fund, is ready to start investing soon after that. 

“The real thing to do is to start now if you’re interested. You start talking people, having the conversations, getting those dollars in,” Schleidt says. 

Bruce Adams, president of the Credit Union League of Connecticut, says these businesses will need a place to put their money and credit unions are ready to help. 

“What matters is your books and records and the ability for you to show you are running a clean business. Conversely, the more owners you bring in the door with you, the more investors, those folks will have to go through the due diligence process as well.” 

Cannabis is still illegal at the federal level which is why compliance for these companies will be strict and necessary. 

“If you’re taking money in exchange for providing goods and services to a cannabis business you have now entered the world of being a marijuana-related business,” Adams says. 

“When somebody is going to come in and say ‘ok, I can front a $3 million fee for you and that’s just the fee, where do I send the money? You have to have a place that you can do business,” Vega says. 

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