It’s no mystery that today’s cannabis businesses are limited in terms of traditional financial services. There are companies who still struggle to find a bank that will support their business. Others may have a bank account but are unable to secure business loans or use other banking products. Often these companies rely on either raising capital by giving up significant equity or taking debt with predatory terms through an independent provider. While business financing is a current, industry-wide issue and one that many parties are working to solve, there is another area that is overlooked and in need of a solution – the financing of the transactions/orders themselves.
Today, a large portion of wholesale cannabis orders are still paid upon delivery. Net Terms are often dependent on market conditions and if trust has been established between parties. In the western states for instance, with its lower wholesale prices and demand, sellers are not willing to extend terms because they need the cash from sales to fund their immediate operations . Additionally, if terms are offered, they typically come only after several successful transactions and often don’t extend past 30 days.
To solve this problem, Apex Trading and Lendica have partnered to provide the industry with DrawDown, FundNow and PayLater wholesale order financing solutions.
What Financing Options are Available on Apex Trading?
DrawDown: Flexible working capital to scale your operations as needed.
Scenario: You are looking to invest in new equipment or want to expand your facility and need financing. After submitting an application, choose the amount of funds you need to help your business grow. Funds are then paid back on a weekly or monthly basis over six or twelve months.
FundNow: Get Paid for your invoices now.
Scenario: You have a large order that is going to be delivered next month but could use the $ now. After submitting an application, collect up to 80% of the invoice amount promptly and receive the rest, minus a simple, flat fee, when your customer completes payment.
PayLater: Allow your customers or yourself to pay invoices over time.
Scenario: You’re a dispensary who would like Net 30-60-90 days terms for an order but the seller doesn’t provide terms. After selecting the order and financing terms and submitting an application, the seller will be paid upon delivery and you will pay the order off in weekly installments plus a simple flat fee.
What are the benefits of utilizing financing as a seller?
Order financing is available for all sellers on Apex Trading who submit their application and are approved. The size of the business, transaction type, and order size are not limiting factors.
DrawDown, FundNow, and PayLater are all available financing options for sellers and each provide different benefits.
DrawDown – Through their Apex Trading account, a seller can initiate drawn down funding through a quick application process. Once approved, the seller will know how much financing is available to them to invest in their operations for business growth.
FundNow – Rather than having to wait to receive money for an order that will be delivered in the future, a seller may initiate FundNow. After selecting the order and submitting an application, a seller will know within 24 hours if they have been approved. Once approved, the seller will receive 80% of the order value upfront allowing them to use that money for other needs rather than waiting on cash from the order delivery.
PayLater – Net Terms are sometimes difficult for a seller to offer given market or business conditions. PayLater allows a seller to offer Net Terms to a buyer for a simple flat fee. This solution meets the buyers’ request for Net Terms and reduces the financial burden on the seller.
What are the benefits of utilizing financing as a buyer?
PayLater is the primary financing solution for buyers on Apex Trading. It is available for all buyer types no matter their license, type of transaction, or order size. There is a one-time application process after which a buyer may select any yet-to-be delivered wholesale orders from their Apex Trading account for the PayLater service.
Utilizing PayLater benefits a buyer in multiple ways.
First, it allows a buyer to place larger orders which often come with volume discounts offered by the seller. This reduces the per unit purchase price which increases margins.
Second, rather than paying upon delivery, a buyer can use PayLater and use their cash for other purposes such as marketing, displays, promotions that increase consumer traffic and generate more revenue.
Lastly, if the buyer can quickly turn over their inventory they can receive the cash from their sale before payment is due to their supplier. This leverage creates additional profits and can assist with managing volatile cash flows. This is both valuable for a dispensary and a processor/extractor. For example, a processor needs to turn the trim into a finished product, which can take several days/weeks, before that product can be sold. By leveraging PayLater, the processor can begin selling the final product before they have to pay for the original material.
What are the rates and how do they compare to competition?
Rates may vary depending on the business track record and volume. However, the typical rate falls between 1.9 and 2.9% per month.
In terms of competition, there is one other platform that provides wholesale ordering financing. LeafLink currently charges ~5+% per transaction and limits the service to only buyers and sellers on their platform!
To learn more about how Apex Trading’s wholesale business management software can help your cannabis company with inventory, order and sales management, we encourage you to visit ApexTrading.com or request request demo by clicking here.