Why Investors Are Turning Toward Cannabis in 2017
The marijuana industry has come a long way in the last 5 years. The cannabis market as-a-whole is one of the fastest growing industries in North America, and is quickly becoming one of the most profitable. States that have passed some form of legalization are reporting gross sales in the billions, and these numbers will be increasing as more states legalize marijuana.
Many investors are turning toward the cannabis industry to supply capital to this cash starved industry. Whether from venture capital firms or private money investment, the marijuana space is seeing more investment from private non-bank sources than ever before. Despite marijuana being illegal at the Federal level, investors are enamored with the higher returns and the appeal of the growing industry.
Continued Research and Positive Reception
Marijuana-related products continue to gain popularity for both medical and adult use. The largest contributor to the cannabis market’s expansion is the mounting medical research showing its benefits. Able to help with ailments ranging from anxiety to cancerous tumor growth, cannabis and derivative products like CBD (Cannabidiol) oil are now receiving recommendations from doctors in many states. Attention to its medical benefits is gaining worldwide acceptance.
There are 28 states that have now legalized some form of marijuana use, where 8 of these states do not require a medical recommendation. There were 4 additional states which voted to legalize adult use in the November 2016 Elections, which has only proven to be an economic boom for states like Colorado that have had increased employment, increased tourism, real estate values and other economic benefits. Colorado reported nearly $1 billion in cannabis product sales in 2015, and the figures for 2016 are expected to be larger.
One of the largest issues marijuana businesses are faced with is the difficulty and cost of obtaining banking and traditional loans to expand their business. Despite being legal in some form in 28 states, it remains difficult for cannabis-based businesses to open a business bank account, obtain a loan, or open a line of credit. This is where private investors provide value to the industry.
Private capital is one of the preferred options available to the business owners, who want to maintain control of their company without further diluting their equity. Dynamic Alternative Finance has been able to secure more than $25 million in funding for cannabis-based businesses in the past 2 years. The need for capital continues to grow as more businesses are expanding into other states and larger facilities.
High Returns from Sound Investments
One of the reasons investors are looking at the marijuana industry is for the above average returns and the profit potential. Investors can receive monthly cash flow and obtain returns in the 12% and higher range. The cannabis industry is constantly evolving and investors are providing new and innovative products to serve this need for capital to expand their business.
Several of these cannabis businesses are large, multi-location, vertically-integrated operations with multiple product offerings. At Dynamic Alternative Finance, we arrange financing for established marijuana businesses that require more than $250,000 to expand their operations.
The Opportunity is Only Growing
The opportunity for investors is expanding as more states legalize marijuana and cannabis business owners have a need for equipment, real estate and working capital loans. Continued legalization of cannabis and related products means that not only will more companies open in the market, but more companies will decide to move into the market. Food and beverage companies are starting to explore and expand with marijuana-infused offerings and tobacco companies are investing in cannabis vape brands. Cannabis derivatives like CBD are presenting companies the opportunity to include the health benefits of marijuana in their products, without the psychotropic effects.