In just a short span of time, the marijuana industry is growing big. Few years back, the idea of legalization of the weed plant for both medical and recreational use is too hard to achieve. But, when 2018 comes in, there is a booming market of this luxurious weed. Most states in the US have already legalized medical and recreational marijuana.
Moreover, in Colorado, aside from cannabis legalization, they also implemented the regulation and taxation of it. And based on records, around $247 million revenue has been made by Colorado from marijuana taxes, fees, and licenses in just one year. Even the Stocktrade’s ranks of Canadian weed stocks are also on the rise. That’s why more and more entrepreneurs are taking the opportunity to penetrate into this kind of industry.
With its vast growth, the appearance of cannabis can be seen mostly everywhere. From edibles to restaurants, from clothing lines to lifestyle brands – all these are invading the industry with a blast. However, how easy it is to put up a legal business out of this controversial product? What are the strategies that those business enthusiasts are doing to successfully get into the loop?
In all kinds of business, it is essential that you know the things that really caught your interest. So do with the marijuana market as lots of products may be listed down under the cannabis roof. You may be interested with apparels, production and development of strains, weed cultivation or analytical testing. Actually, the potential product to introduce into the market is really countless.
Yet, the main key is to do the things that you really love the most and incorporate marijuana in it. Then analyse if it can be feasible to penetrate the business industry or not. In case, you think it can work well, then go for it and push it on the market. If not, then you’ll have to keep on thinking and moving on for another. Just keep going until you find the one that really fits.
Analyse the flow of the industry
It is very important to check on your environment. Look for your competitors, analyse their businesses, and know the strategies that works for them. Basically, try to consider some factors like the level of competition, the startup costs that you need, or other areas for funding.
Invest more time and effort in studying the ways on engaging into that specific area of the industry.
For a successful application for corporate finance, seven corporate finance success factors are decisive. Whether an application for business credit is filed with a bank, or venture capital is requested from an informal investor, a private equity fund, crowdfunding or a credit union, it is precisely these success factors that pave the way for corporate finance. These are plan, experience, knowledge, perseverance, flexibility, passion and commitment. What that means for a successful credit application becomes clear.
Business Loan Application Process
1. Business financing plan
The application for business financing is always dependent on a plan. Not only a business plan but also a financial plan. That financial plan must meet certain conditions. Different financiers apply to different requirements regardless if it is a no-guarantor loan or a guarantor loan. In essence, it means that there must be sufficient profitability. That seems obvious. But in practice, financial plans prove to be insufficient. After the investment, the profitability appears to decrease. Not a good starting point for corporate credit!
Such a financial plan must above all be based on realistic assumptions and estimates of the prices such as the following:
costs for producing and delivering the product (or service)
the general costs that are necessary to get the business model up and running. keeping, etc.
Within a conservative (cautious) financial forecast, there must be sufficient room to meet the financial obligations. But the financial impact must also be related to the existing market conditions. What are the market prices of competitors, what are realistic cost levels, etc? And: where do they appear?
The nature of the business case is of course also important here. Is this an existing company in a market with undiscovered market potential? A company where a good benchmark is available? Or are we talking about a ‘startup’ in a risky and dynamic business environment with an international market reach? That makes a big difference between the different types of financiers. A credit bank is more likely to be convinced based on the proven financial performance over the past 3 years. While a risk financier is more stimulated by market potential and scalability.
Many informal investors only step into a new business model with – potentially – 5 times better products or services. Or: a cost-effective proposition: that costs 5 times less for a comparable product. A business model with only a marginal or comparable financial performance does not have to rely quickly on support from risk financiers for a starting company. Because experience shows: gradually there are setbacks. Then additional costs and investments must be made. With a marginal business case, the return on investment ROI is ultimately too tight. With all the financial problems that entail.
2. Knowledge for business credit
It helps if a business financing applicant has the right knowledge. And this knowledge also displays in a good way. Knowledge of the products, the markets, the competitors, the trends, the most important suppliers, the customers, the opportunities and the threats. Thorough knowledge arises from experience but also preliminary studies. A financier entrusts his money to entrepreneurs with solid preparation. Who has prepared well? Who has studied the market? Who can take timely measures based on that knowledge? Who can adjust the business case? The ability to interpret the dynamics of the market and to be able to develop the right steps from there is an important plus.
3. Display experience for business financing
For a business credit, displaying the right experience is a big plus. Experience with a comparable role in business. Is the correct commercial, operational and financial experience available !? And if not: how is that solved? And is the experience also within the same or comparable industry? Leading a development project for innovative technical products is different from running a construction company or a transport company.
But the perseverance of the credit applicant is also essential. And also to what extent is that supported by his team. The road to success has many obstacles. The business goals are on paper directly behind the horizon. But there are many obstacles on the path there. And they must be taken. If things go wrong, management must have the resilience to get through it. No business financing without perseverance. Because the provider of business financing does not want an active role in business operations.
5. Passion for corporate credit
Passion also counts firmly. The passion for the product or service is crucial when applying for business credit. An absolute confidence in a distinctive position in the market. Added value for customers and a decisive distinctive character compared to the existing and competitive offer. And the passion shown is also contagious: the financier is positively influenced. The passion is carried as fast. And if the financier feels that way too, then the customers and suppliers will also notice it. The basis for solid profitability has then been laid.
Flexibility is an essential basis in the borrower’s thinking and actions. Perseverance and passion are good qualities. But an open attitude to the environment and the ability and willingness to bend along with new developments is just as important. Because in the period between the start and a mature operation, the internal and external operating conditions change. This almost always affects the flexibility of companies. If the original plan is maintained too persistently, the right opportunities will not be used.
7. Commitment for business financing
The borrower’s own commitment is always expressed by a substantial contribution of its own financial resources. Some applicants for business financing say with too much ease: that investor only has to do 100%. We contribute our knowledge and experience. That is a nice idea. But no chance with the application for working capital. It is the question of the tear in the pants at a so-called discomfiture.
The seven success factors for business financing are plan, experience, knowledge, perseverance, flexibility, passion and commitment. Evaluate your own score on all these aspects. Where are the blind spots and points of attention? The preparation of an application for business financing therefore requires a fair reflection on these success factors. This helps considerably to build the right bridges to corporate finance.